When to reddemm HH bonds and Keogh Plans

Unless the HH bonds have inscribed on the face that there is deferred interest, there is no tax problem. HH bonds pay interest every 6 months and were bought at face value, unlike EE bonds which were baought at discount and accured interest. Keogh funds I can't answer.

Don't confuse any income tax she might owe on her final return with any income pertinent to the Keough plan and bonds which you inherited.

In the first case, those dedutions she had are taken only against any income she might have had before she passed on.

As for the main assets, you as heir pay the taxes.

ChEAr$, Harlan Lunsford, EA n LA

In the year you actually cash in the Keough plan, or any part of it, you will pay ordinary income tax at your tax bracket on any amount that was not an after-tax contibution. For small amounts, and particularly if you are in the 25% tax braket or higher (or would be by cashing in the Keough) I suggest you get form 4972 and take a Lump Sum Distribution as the taxes for that are not based on your tax bracket and may be considerably less than paying ordinary income tax on withdrawals.

ed.

YOu're advising OP to use a form 4972? THIS, I got to see.

Christmas ChEAr$, Harlan Lunsford, EA n LA

So, Harlan, what's wrong with a 4972? wouldn't you at least advise your client it is an available option? A $150K Keough is taxed $24,570, or 16.38% with a 4972. That would look pretty good to someone in the 25% bracket. It has other advantages, also. It doesn't go on your AGI to afffect many credits' phaseouts, AMT, SS taxability, etc.

ed

If you look at the OP, you'll see it's from am fellow whose 90 year old mother IN LAW died last year. For him to qualify, he must have been the beneficiary of her plan; not just heir to her estate.

Or at least that's the way I read it. Actually I've never had a case like this anyway.

Christmas ChEAr$, Harlan Lunsford, EA n LA

The beneficiary of a qualified employer plan can qualify for form

The words "or any amount" above implies it would not meet lump sum rules. But if it were really lump sum it might.

I'm age 76. retired, have substantial tax deferred TIAA-CREF retirement accounts or IRAs with associated Minimum Distributions each year. Also still doing some paid consulting, some royalty and rental property income, so in the top tax bracket on all this income.

One of the TIAA-CREF accounts is a small "single person" Keogh Plan, into which I still make small contributions each year, based on the consulting and book royalty income for that year.

Does the "file a Form 4972 and take a Lump Sum Distribution" theme that has emerged in this thread have any relevance to me, now or later? (I've never heard of this previously.)

Could be.

See page 74 of

Try it and see the results.

Yes you can take a 4972 lump sum distribution ONCE from this Keough Plan at very attractive tax rates. Get IRS form 4972 and its instructions, which are similar to Publication 17 page 74 et al.. Do not be confused with the "only once per plan participant" garbage. You are a spearate "plan participant" for EACH plan you have and Do Not have to combine them (unless they ARE seperate plans and/or employers. Each polan can be on a separate 4972.

ed.

In my last post I misstated. The word *unless* should be *if*. That is, you don't have to combine them if they are separate plans or employers.

A note> You cannot use a form 4972 for an IRA, only Pension, Profit Sharing and 401K plans

ed