Life and Death Planning for Retirement Benefits

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422 Life and Death Planning for Retirement Benefits
“principal residence”; Reg. says the determination depends on all the “facts and
circumstances.”
“Qualified acquisition costs” are the costs of “acquiring, constructing, or reconstructing a
residence,” including “usual or reasonable settlement, financing, or other closing costs.”
A “first-time homebuyer” is a person who has had no “present ownership interest in a
principal residence during the 2-year period ending on the date of acquisition of the” residence
being financed by the distribution. If the homebuyer is married, both spouses must meet this test.
Finally, to the extent the distribution in question qualifies for one of the other exceptions
(e.g., a distribution to pay higher education expenses), it will not count as a “first-time homebuyer”
distribution (so it will not count towards the participant’s $10,000 limit) even if it is used to pay
expenses that would qualify it for the first-time homebuyer exception.
9.4.10 IRS levy on the account
Forced distributions after 1999 resulting from an IRS levy under ill not be subject
to the penalty.
9.4.11 Return of certain contributions
Certain excess contributions to “CODA” plans (see may be distributed penalty-
free if various requirements are met. See and Regarding return of
an IRA or Roth IRA contribution prior to the due date of the tax return for the year for which such
contribution was made, see B).
9.4.12 Qualified reservist distributions
The penalty does not apply to “qualified reservist distributions” (QRDs). A QRD is a
distribution from an IRA or from the elective-deferral portion of a QRP , that is made
after September 11, 2001, to an individual reservist who is called to active duty. The active duty
call or order must be for more than 179 days or for an indefinite period, and occur after September
11, 2001. The distribution must occur on or after the date the participant is called up and before
the end of the active duty period. See C) regarding the ability to “roll
over” QRDs without regard to normal rollover deadlines and contribution limits.
9.4.13 Exceptions for tax-favored disasters
Congress likes to enact special exceptions for individuals affected by natural disasters,
provided the disaster is on the national news for at least a week. Someone who lives in a county
affected by Hurricane Katrina may thereby qualify for a penalty exception, while someone who
suffered worse losses in a local disaster that affected only a few people will not qualify. For penalty
exceptions applicable to certain hurricane victims, see
165, and IRS Form 8915.