AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner (CFP) and have performed fee only investment management and financial planning services for the past 11 years.
Question I received a check from a mutual fund where my IRA used to be. This check was part of a settlement of some typw of class action lawsuit. I have since transferred my assests to another mutual fund where I have begun early distributiuons under the 72(t) rule. I assume I can't deposit this money into the account from which I am taking these 72(t) distributions. Would there be any problem with just having this check reissued to me and cashing it. I understand doing this will have taxes and probably 10% early withdrawal penalty taken out, but will it trigger any other problems with the IRS and the 72(t) distributions?
Answer Hi. Based on my understanding of Rule 72t, since the amount you are required to withdraw is fixed and based on a value in the past, and the check that you received as part of the settlement was not part of the balance used for your rule 72t calculation, this should have no impact on the amount you need to withdraw. In addition, if you cash this check, it will be counted as a distribution from the IRA and taxed/penalized accordingly, however, this should have no impact in rule 72t. With all of this being said, please note I am not a CPA and do not prepare income tax returns so you should run this advice past your tax professional. I hope this helps.
