TAX RESEARCH MEMO: BUSINESS PURPOSE ASSIGNMENT INSTRUCTIONS OVERVIEW For this assignment, you will be submitting a tax research memo regarding the scenario detailed below. The purpose of this assignm

ACCT 612

Your Firm

Your Town and State

Date

Phyllis is the owner of the ABC Individual Retirement Account (IRA). However, on February 11th, the present year, Phyllis requested asked for a check for the IRA balance on the account she opened at ABC firm. She received the check that had been issued in her name. She rolls over the check in a new IRA account at another brokerage firm XYZ after getting it on the day she requested it. The same year, on May 8th, Phyllis asked for a check in her IRA, which she had rolled over the prior check into. Thirty-five days later, she placed the check into yet another IRA account in the same year.

Specific Issues

• Is Phyllis's May 8 distribution taxable?

Conclusions

Phyllis' transaction is a rollover since she withdraws cash from one qualified retirement plan and contributes it to another within 60 days. Unless the rollover is to a Roth IRA or designated Roth account, rollovers are not taxed. Regardless of the amount of IRA accounts maintained, an individual can only make one rollover from an IRA in any given year (Cymbal, & Barrett, 2016). As a result, Phyllis' rollover on May 8th is taxable because the IRA rollover was completed in the same year it was deposited.

Support

The initial rollover from the ABC firm's IRA account to the XYZ firm's IRA account was not to be included in taxable income because Phyllis deposited the check within 60 days, and it was a single rollover to an IRA account. The May 8th rollover occurred three months after the initial rollover. According Cymbal, & Barrett, (2016) “Section 408(d) (3) (B) of the Internal Revenue Code limits taxpayers to one IRA-to-IRA rollover every 12 months”, as proposed regulation section “1.408-4(b)-(4) clarifies (ii)” (Cymbal, & Barrett, 2016). Phyllis made her transfer three months after the first rollover, and as a result, she may be liable to a 10% early withdrawal tax on the balance included in her taxable income.

• Cymbal, K. M., & Barrett, T. (2016). Increasing the Odds of Making a Successful Roth IRA Conversion. Journal of Financial Service Professionals, 70(3).

________ Discuss with client. Date discussed ________

________ Prepare a memo or letter to the client

________ Explore other fact situations

________ Other action. Describe:___________________________

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Preparer ________ Reviewer ________ Partner ________