On 2015-04-27 14:25, Arthur Rubin wrote:
> On Sunday, April 26, 2015 at 4:35:03 PM UTC-7, Mark Bole wrote:
>
>> Once you are over age 59.5, you can take out conversion amounts
>> penalty-free regardless of how long they have been in the account. If
>> you first opened your Roth at least five years ago (not necessarily by
>> doing a conversion), they are considered qualified distributions, and if
>> not, they meet the over age 59.5 exception, either way they avoid the
>> 10% penalty.
>
> The section on penalties for earlier distributions from Roth accounts in Publication 590-B, and in the earlier Publication 590, is not well written. The Roth chapter of the publication 590-B is not well-written. _If_ it had said that you would have an exemption from any early withdrawal penalty from a Roth if you would have had an exemption from the early withdrawal penalty on from a traditional IRA, instead of listing conditions under which you _might_ have an exemption from penalty, I would agree with you. The actual law seems to differ, and specifies that the penalty is incurred on violations of the 5-year rule, even if over age 59-1/2. I haven't checked the regulations, but it is not unusual for IRS publications be inconsistent with the law, and not unheard of for IRS regulations to be inconsistent with the law. Just look at the 1-year rule for IRA "contributions" within 60 days of withdrawal.
>
> Arthur Rubin, CRTP in Brea, CA
>
Here (below) is what the regs and the code say. First, I stand by my
statement that qualified distribution trumps the five-year conversion
rule. I note you also are no longer disputing that contributions can
always be withdrawn tax and penalty free at any time, any age.
Then, we are left only with the case where the taxpayer's initial Roth
account is opened less than five years before turning 59.5 years old.
If conversion money is withdrawn after age 59.5, the 10% penalty is
still subject to the Sec. 72(t) exceptions. 72(t) is very clear that
after 59.5, the 10% penalty does not apply.
==============================================
§408A. Roth IRAs
(F) Special rule for applying section 72
(i) In general
If-
(I) any portion of a distribution from a Roth IRA is properly allocable
to a qualified rollover contribution described in this paragraph; and
(II) such distribution is made within the 5-taxable year period
beginning with the taxable year in which such contribution was made,
then section 72(t) shall be applied as if such portion were includible
in gross income.
==============================================
§1.408A-6 Distributions
(b) The 10-percent additional tax under section 72(t) also applies to a
nonqualified distribution, even if it is not then includible in gross
income, to the extent it is allocable to a conversion contribution, if
the distribution is made within the 5-taxable-year period beginning with
the first day of the individual's taxable year in which the conversion
contribution was made. The 5-taxable-year period ends on the last day of
the individual's fifth consecutive taxable year beginning with the
taxable year described in the preceding sentence. For purposes of
applying the tax, only the amount of the conversion contribution
includible in gross income as a result of the conversion is taken into
account. The exceptions under section 72(t) also apply to such a
distribution.