Expert: Carole Dunton - 11/2/2009

Question
Carole,
Are there any Tax and Penalty exceptions when cashing out a 401k to purchase farmland?

Answer
Hi,

In order to avoid tax you have to roll the 401(k) to a Traditional IRA or another employer's qualified plan.

There are exceptions to the penalty.  They are (1) distribution made to an employee who has attained age 55 and separated from service; (2) distribution is part of a scheduled series of substantially equal periodic payments made over the life expectancy of the participant; (3) distribution made due to total and permanent disability; (4) distribution to the extent unreimbursed medical expenses exceed 7.5% of AGI; (5) distribution made to an alternate payee pursuant to a qualified domestic relations order; (6) distribution due to an IRS levy; (7) distribution to reservists while serving on active duty for at least 180 days.

Regards,
Carole