UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Next Thread
Author: ccross Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127807  
Subject: Quick question Date: 5/28/1999 6:03 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Good day to all. I have money in a mutual fund that I would like to use as a down payment on a home. Does anyone know if this would be considered income and if I would have to pay income taxes on it first? I'm very new to this, so if it's a silly question, please bear with me.

Also, I plan on taking advantage of the one-time ability to withdraw $10,000 from my IRA to use as a down. I realize that this is considered income, but how does that work exactly with regards to my home purchase and tax filing?

Thanks!
Print the post Back To Top
Author: 13492 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3868 of 127807
Subject: Re: Quick question Date: 5/31/1999 2:55 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Author: ccross
<I have money in a mutual fund that I would like to use as a down payment on a home. Does anyone know if this would be considered income? Also, I plan on taking advantage of the one-time ability to withdraw $10,000 from my IRA... how does that work exactly with regards to my home purchase and tax filing?>


ccross,

It sure is a "Quick" question but I don't think you'd get a "guick" answer for your question.

I think as a "new" home buyer, you should really pick up the phone and contact your tax adviser regarding your specific tax structure and its consequences. Don't just rely on messages from this board.

You probably then come back here and share with us.

Instead of withdrawl, some IRA would allow you to "borrow" against it. You then wouldn't have to worry about paying income taxes.

David




Print the post Back To Top
Author: dharmadollars Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3869 of 127807
Subject: Re: Quick question Date: 5/31/1999 9:21 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
David posted:

"Instead of withdrawl, some IRA would allow you to "borrow" against it. You then wouldn't have to
worry about paying income taxes.
"

It is my understanding that--by statute (Code Sec. 408(e)(3) I think)--loans against IRA accounts are deemed to be constructive receipt of the amount "borrowed", that this amount becomes taxable for the year in which the loan was made, and that if you are younger than 59 1/2 the 10% penalty also applies. Please show me the error of my ways.

Regards--dharmadollars.


Print the post Back To Top
Author: Moneymoover Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3870 of 127807
Subject: Re: Quick question Date: 5/31/1999 9:27 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0

One important point not being discussed in the cash vs. loan question OR "Pay mortgage down now, enhance retirement funds later"--TIME. The next 5 years may be the best 5 years to be invested in the 25 years. Albert Einstein said it himself "The greatest discovery this century is compound interest". There are several examples of people setting money aside for 10 years and benefiting from compound interest vs. saving for 30 years and less compounding. The current market growth will come to an end. Remember the deductible IRA of the early eighties that had no income restrictions? Many of my friends said "I'll do it next year when I have more money". Congress changed the rules before they ever got in.

Each of us have our own philosphy about managing money and you've got to choose what is right for you. I could not sleep at night if I wasn't growing my money over 30 years instead of 20.

Good luck with what ever decision you make.
Moneymoover

Print the post Back To Top
Author: 13492 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3895 of 127807
Subject: Re: Quick question Date: 6/1/1999 7:07 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Author: dharmadollars
<It is my understanding that--by statute (Code Sec. 408(e)(3) I think)--loans against IRA accountsare deemed to be constructive receipt of the amount "borrowed"...>

Thanks for pointing that out.

Did I say IRA? What I meant was 401K instead of IRA. My understanding is that as long as the 401K is set up for employees to borrow against their 401K plan, no penalty or taxes would be assessed on the loan because the loan will have to be paid back.



Print the post Back To Top
Author: dharmadollars Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3896 of 127807
Subject: Re: Quick question Date: 6/1/1999 8:25 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Unless employer plan provisions are more restrictive, you can borrow up to 50% of your vested interest in your 401k account, not to exceed $50,000. If you leave that employer before the loan is paid back, the unpaid portion will be treated as a distribution subject to income taxes, and a penalty if you are less than 59 1/2. This may be a good source of funds. I'm sorry; I have forgotten the original scenario in which you proposed this strategy.

Regards--dharmadollars

Print the post Back To Top
Author: lhaselden Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3915 of 127807
Subject: Re: Quick question Date: 6/2/1999 10:53 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
<< My understanding is that as long as the 401K is set up for employees to borrow against their 401K plan, no penalty or taxes would be assessed on the loan because the loan will have to be paid back>>

If you leave the company before the loan is repaid
loan, the balance will count as a disbursement.

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Next Thread
Advertisement