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Author: cshank Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: 403(b) loan Date: 10/15/1999 9:52 AM
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I recently changed jobs and have to rollover my 403(b) account. But I have an outstanding balance on a loan I took against that account. I'm told I have to repay that money immediately. Can someone help me with the best way of avoiding the worst tax consequences.
Thanks
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Author: TaxService Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19719 of 121095
Subject: Re: 403(b) loan Date: 10/17/1999 12:07 AM
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I recently changed jobs and have to rollover my 403(b) account. But I have an outstanding balance on a loan I took against that account. I'm told I have to repay that money immediately. Can someone help me with the best way of avoiding the worst tax consequences.


***There's not much you can do other than to repay the loan or eat the tax and penalty that goes along with it, unless you can come up with an exception:

The early distribution tax does not apply to distributions that are:

1. Made to you on or after the date on which you reach age 591/2,
2. Made to a beneficiary or to the estate of the plan participant or annuity holder on or after his or her death,
3. Made because you are totally and permanently disabled,
4. Made as part of a series of substantially equal periodic (at least annual) payments over your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your beneficiary (if from a qualified employee plan, payments must begin after separation from service),
5. Made to pay for qualified higher education expenses for yourself, your spouse, your children, or grandchildren to the extent that the distribution does not exceed the qualified higher education expenses for the taxable year,
6. Made to pay for a first-time home for yourself, your spouse, your children, your grandchildren, or your ancestors to the extent that the distribution is used by you within 120 days from the date of the distribution,
7. Made to you after you separated from service with your employer if the separation occurred during or after the calendar year in which you reached age 55,
8. Paid to you to the extent you have deductible medical expenses (the amount of medical expenses that exceeds 7.5% of your adjusted gross income), whether or not you itemize deductions for the tax year,
9. Paid to alternate payees under qualified domestic relations orders (QDROs),
10. Made to you if, as of March 1, 1986, you separated from service and began receiving benefits from the qualified plan under a written election that provides a specific schedule of benefit payments,
11. Made to correct excess deferrals, excess contributions, or excess aggregate contributions,
12. Allocable to investment in a deferred annuity contract before August 14, 1982,
13. From an annuity contract under a qualified personal injury settlement,
14. Made under an immediate annuity contract, or
15. Made under a deferred annuity contract purchased by your employer upon the termination of a qualified employee retirement plan or qualified annuity and that is held by your employer until you separate from the service of the employer.

Only exceptions (1) through (6) and (8) apply to distributions from IRAs. Exceptions (7), (9) through (11) apply only to distributions from qualified employee plans. Exceptions (12) through (15) apply only to deferred annuity contracts not purchased by qualified employer plans.

***The result of all this noise can have an impact that might hit you for 50%, or more, in tax and penalty. This after the feds and, possibly, the state get theirs.

You must check to see if you can borrow money, to repay the 403b plan, more cheaply than having to pay the tax and penalty.

"Jack"

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