1099-r

[awesome]

A client divorced her husband in 2012 and received 1/2 of his 401k $30000. She received a 1099-R with distribution code 2. Does she has to pay 10% penalty? If not, what code do you put in form 5329 for exemption of penalty?

[WhiteOleander]

No need for a 5329. Code 2 means early distribution, exception applies. So, the IRS knows there is no penalty.

[ChEAr$]

No need for a 5329. Code 2 means early distribution, exception applies. So, the IRS knows there is no penalty.

HAH! IRS knows, do they? well, I guess we may assume so, until the cp2000 letter comes.

[awesome]

HAH! IRS knows, do they? well, I guess we may assume so, until the cp2000 letter comes.

So, is it 10% penalty exempt? And why?

[jimmcg]

So, is it 10% penalty exempt? And why?

Penalty exempt if issued under a qualified court issued QUADRO. If you want a cite you will have to do the research yourself.

[JoshinNC]

Yes

So, is it 10% penalty exempt? And why?

Because the 1099-R says so. Any other questions?

[JohnH]

So, is it 10% penalty exempt? And why?

Look on pages 12-11 and 13-3 of The Tax Book for 2011 for your answers

[smithtax]

Penalty exempt if issued under a qualified court issued QUADRO. If you want a cite you will have to do the research yourself.

IRC §72(t)(2)(C)

[Matt Sova]

Qdro

A distribution via a QDRO (Qualified Domestic Relations Order) is subject to tax, but not the 10% penalty. It is part of the property settlement. If she had taken her share as a direct rollover into an IRA for herself and then taken the money out she would be subject to a penalty.

Because the 1099-R is coded 2 you do not have to put any reason why it is not subject to the 10% penalty. The IRS does receive a copy of the 1099-R and will clearly know that the exception applies. No CP-2000 will be issued.

[smithtax]

A distribution via a QDRO (Qualified Domestic Relations Order) is subject to tax, but not the 10% penalty. It is part of the property settlement. If she had taken her share as a direct rollover into an IRA for herself and then taken the money out she would be subject to a penalty.

Because the 1099-R is coded 2 you do not have to put any reason why it is not subject to the 10% penalty. The IRS does receive a copy of the 1099-R and will clearly know that the exception applies. No CP-2000 will be issued.

Very clearly and succintly stated and supported, of course, by code.