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Author: gurdison Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19380  
Subject: Re: ira inheritance Date: 1/19/2000 3:40 PM
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In total it was around 150,000 to be split between the two of them. We would like to leave it in the IRA if at all possible but the irs says we have to remove before the end of the 5th year.>>

There is one other variation on the lump sum distribution. You can take partial distributions as long as the entire amount is distributed by 12/31/04. This can allow you to plan your tax situation. For example, if you want to take an extended leave from your job or to change careers you could take the distribution over one or two tax years and reduce the tax impact. If you have been a FOOLISH investor and are within five years of an early retirement, you can use your distribution to smooth out your transition.

You don't mention if the IRA is all in cash. If it is you can invest it FOOLISHLY while it is in the IRA. You still need to take all distributions as ordinary income by 12/31/04. This will give you plenty of time to decide on your plan. You have to evaluate if you are better off adding 75k to your 2000 AGI (and paying between 35 and 50% in taxes) or have the full 75k work for you until you are ready take your distribution.

I had a very similar situation and ended up taking my distributions in the 4th and 5th years. What I would have paid in taxes in the first year remained fully invested piling up huge gains for me. By managing my income, my first distibution was while I was in the 28% bracket. If I took it the first year, it would have been in the 31% bracket. Good luck with your choices!
BRG
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