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Posted by whatsupdoc205 on April 6, 2008, 3:42 pm
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A bond issuer has re-sent an uncashed check for interest paid
several years ago to a defunct tax id.
The tax id was for a qualified tax-deferred retirement trust (not
an IRA, but a private plan) when belonged to my father and
transferred to my mother when he died. We closed the plan
in 2006 and rolled over the value of the assets to an IRA.
I told my mother not to do anything with the check until I can
decide the best course of action (i.e. most tax efficient).
If the plan were still active and the interest were distributed to
my mother, it would be a taxable as pension income. Also, the
plan would issue a 1099-R to report the distribution. But ideally,
we would leave the interest in the plan and defer the taxes.
Is there anything we can do now to optimize the process?
First, if we want to accept the taxable distribution, can she
simply deposit the check without the plan having to file a
1099-R?
(I am not sure the plan can issue a 1099-R since it is closed.
Wouldn't the plan also have to file a 1041 or something similar?)
If she does that, would she report the amount as interest
income or as pension income?
Would it be better (and is it permissible) if she filed a W-9
with the bond issuer so that the amount is paid to her tax id,
not the retirement plan's tax id?
If she could do that, then she would report the amount as
interest income. Right?
Second, is there some way to defer the tax on the interest
payment altogether?
If we had left the amount in the retirement plan, it would have
been rolled over to an IRA along with the rest of the value of
the plan.
Could we simply deposit the interest payment into the IRA and
treat it as a rollover?
Even so, isn't it considered to be a retirement plan distribution,
and all the questions above regarding a 1099-R and plan 1041
still apply?
Sigh, our current CPA does not seem to know for sure what
the correct course of action. Yeah, we'll find someone else
eventually. But not within the next 60 days ;-).
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