The CPA Journal

In the article “New Minimum Distribution Rules for IRAs,” October 2002, the last sentence in the paragraph titled “Starting Date” is incorrect. The 2003 RMD is based upon the value of the IRA at December 31, 2002, without any reductions.

Also, the article does not mention that when the designated owner is the spouse, the spouse may roll over the IRA and elect to treat it as the spouse’s own IRA. If the spouse is under 70zw , the rules for the starting date shown elsewhere on the page are applicable. It’s possible the spouse may be able to postpone distributions for many years. The spouse may also name new beneficiaries.

The writer is a member of the NYSSCPA Estate Planning Committee and the Taxation of Financial Institutions and Products Committee.

The paragraph titled “Starting Date” incorrectly indicated that when an IRA owner who turned 70zw in 2002 defers his first RMD to April 1, 2003, the 2003 RMD that must be taken by December 31, 2003, would be based on the value of the IRA account balance at December 31, 2002, reduced by the 2002 RMD taken April 1, 2003. The article as written was consistent with Proposed Treasury Regulations section 1.408-8, Q&A 6. However, the reader correctly points that the final regulations did not provide for this adjustment to the December 31, 2002, account balance. Hence, in the example he cites, the RMD for December 31, 2003, would be based on the account balance at December 31, 2002, without reduction for the 2002 RMD taken April 1, 2003.

Additionally, an error appears in the second sentence of the paragraph entitled “Starting Date,” which reads, “The first RMD required in the year when the owner becomes 70zw and its amount is based upon the value of all IRAs as of December 31 of the year following the calendar year in which the owner turns 70zw .” The word “following” should be “preceding.” Note that the example immediately following is correct.

Regarding the second point, although the article was brief and intended to highlight the new minimum distribution rules, a recommendation was made in the section “Separate Accounts” to separate a surviving spouse’s portion of an IRA with multiple beneficiaries by placing her interest into a new IRA or rolling it over into an existing IRA, thereby further postponing payouts. I believe Blatt and I are essentially “on the same page” on this issue.

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