Definition of 59 1/2

Unlike the definition of age 70 1/2, by which a person has to perform an act in the year in which one reaches that age, it's not the case here. It's quite literally 59 1/2, i.e. age 59 plus six months.

ChEAr$, Harlan Lunsford, EA n LA

It is your actual 59th birthday + 6 months

If someone turns 59 on August 30, is withdrawal without penalty permitted the following February last?

Seth

Righto.

C$, H

Scratch my just posted reply. Feb "last" would still be within the six months, therefore, better wait till next day.

C$, H

I'd say March 1st.

There's little value to cutting things that close.

The age related issue popped up in MTM back in 2003. There were two threads that highlighted the fact that there was guidance relating to when a child attained a certain age for applicable tax benefits (CTC, C&DCC, EITC, etc.), when an individual attained age 70 1/2 for purposes of RMD, when an individual attained age 65 for purposes of the standard deduction and when lump sum distributions from a qualified plan could be averaged over 10 years. There is no official guidance on age 59 1/2. Therefore, using the definition that the IRS used for when one attains age 70 1/2, the answer is (others have said this) the anniversary of your 70th birthday plus six months. See below for the Q&A from the Sec. 401 regs.

The question has been asked about someone born on August 30th. One could also ask about those born on August 29th, and 31st. Is the answer the same for all: I.e., Feb. 28th of the following year or Feb. 29th if the following year is a leap year? As there is no uniform definition of a month except in certain financial transactions, one must take the wording on its face value. A month is the defined number of days for that specific month. Therefore, one would probably be safe in using Feb. 28th for a non-leap year and Feb. 29th for a leap year as the date one turned age 59 1/2 if born on 8/29, 8/30 or 8/31.

Now... "you've got to ask yourself one question--Do I feel lucky?" (I always wanted to use that line in a tax situation!)

Q?3. When does an employee attain age 70 1/2?

A?3. An employee attains age 70 1/2 as of the date six calendar months after the 70th anniversary of the employee's birth. For example, if an employee's date of birth was June 30, 1933, the

70th anniversary of such employee's birth is June 30, 2003. Such employee attains age 70 1/2 on December 30, 2003. Consequently, if the employee is a 5-percent owner or retired, such employee's required beginning date is April 1, 2004. However, if the employee's date of birth was July 1, 1933, the 70th anniversary of such employee's birth would be July 1, 2003. Such employee would then attain age 70 1/2 on January 1, 2004 and such employee's required beginning date would be April 1, 2005.

(balance snipped.....)

No official guidance? Funny, I read in publication 590 that a qualified distribution can be one made ON or after the date one attains age 59 1/2. Pretty clear, I think.

ChEAr$, Harlan Lunsford, EA n LA

Depends on how you define that 1/2. Is it six months or is it 182 1/2 days? If your birthday is August 31st, then 182 1/2 days later would really take you to March 2nd.

Given the ambiguity of the requirement, I wonder if the IRS would really make a big deal about this if you were off by a day or two.

Yes, they would make a big deal of it; a 10% deal! (grin

But of course should a client ask me before hand (Note; they don't always), I would advise them to be sure and wait 183 days. (hours don't count.)

ChEAr$, Harlan Lunsford, EA n LA