I am being told that Liveaboard Boats loans are now impossible

[hellosailor]

Just found out something today that could impact anyone trying to finance a boat. If you've got money in a ROTH IRA, there are no taxes when you take it out. That's always been because you paid 'em going in. But apparently now the IRS has changed policies, as a result of a lawsuit, and if anyone has money in a 401K and rolls that over into a ROTH? That stays untaxed when it is taken out. From the little bit I heard, it sounded like the rollover didn't incur any taxes either. Dunno, but for anyone with money in a 401k, there's been a change and apparently it is worth asking your accountant about it.

[transmitterdan]

Originally Posted by hellosailor

Just found out something today that could impact anyone trying to finance a boat. If you've got money in a ROTH IRA, there are no taxes when you take it out. That's always been because you paid 'em going in. But apparently now the IRS has changed policies, as a result of a lawsuit, and if anyone has money in a 401K and rolls that over into a ROTH? That stays untaxed when it is taken out. From the little bit I heard, it sounded like the rollover didn't incur any taxes either. Dunno, but for anyone with money in a 401k, there's been a change and apparently it is worth asking your accountant about it.

I don't think one can roll over into a Roth without paying taxes. If you think otherwise post the IRS regs.

[Arthur Garfield]

Yes - to roll 401k into a roth IRA one is required to pay the taxable amount BEFORE INTO roth.If not this will void your ROTH account.Pay on your 401k then roll !



All the Best

[hellosailor]

dan?
"If you think otherwise post the IRS regs."
Maybe you didn't read what I wrote. I read an article, not an IRS decision. I said "it abounded like" and suggested getting professional advice. So why on earth would I want to do your homework and cite regulations from the IRS code?

All I know is that some financial writers said the IRS's policies have changed and there is now some advantage to moving 401K money into a ROTH IRA. If you had to pay full taxes at the time of transfer, there probably would be no advantage to doing it, making it questionable as to why they said there was some advantage now to be found.

Don't agree? Great! As I said and say again, ASK A PROFESSIONAL with your own personal and specific information if it sounds like something might be applicable. DO NOT ask me. Not even to go search the IRS code.

[Ex-Calif]

Originally Posted by hellosailor

dan?
"If you think otherwise post the IRS regs."
Maybe you didn't read what I wrote. I read an article, not an IRS decision. I said "it abounded like" and suggested getting professional advice. So why on earth would I want to do your homework and cite regulations from the IRS code?
<snip>

HS - To be fair, what you said is a pretty major announcement. You had to expect someone would ask for a citation.

I'd love a link to the article you read, for example...

But I'm not lazy and can use Google.

Here is a primer on Roth - It mentions "recharacterization" of the Roth.

2014 Roth IRA Rules - Income, Contributions & More | RothIRA.com

Here is a link to the IRS on recharacterization. Clearly beyond mere mortals like me and the advice to get a financial expert involved is probably a good one...

http://www.irs.gov/Retirement-Plans/...nd-Conversions

[SURV69]

Sometimes a lie isn't a lie.

to say:
I will always live in an apartment
I will never leave my job
I will never cruise
and I will never liveaboard

might all be true ... even if the person making these statements, actually intends to do the opposite

by the same token, all these statements might be untrue, even if the person making the statements fully intends to honor the statements

All sorts of life altering situations arise daily in people's lives

what if you lose your job and your apartment burns down?
what if ... after making those statements, you get hit by a car and become paralized(sp)?

How can anyone make such absolute statements, truthfully or falsely,without knowing what the future holds in store? How can anyone expect such statements to be valid?

I would say those statements are like post-dated check. One post-dates a check because, at the time the check is written, the funds are either not available, or for some reason, they don't want that check presented for payment ... but have faith, that I(the check writer), "expects", to have funds available at some future time ... life just might "happen", between the time the check was written and the time of pre-determined presentation.

Now ...

if the applicant said:
I live in an apartment
I am working
I do not cruise
I do not liveaboard

then those statements are valid. They might be true and they might be false ...just like the forward reaching statements ... but ... these present statements wouldn't be subject to the unknown future.

I personally, don't think it's fraud to state something, that by it's very nature, could wind up being true ... or ... false, because of actions beyond the control of the person making those statements.

[Scot McPherson]

I don't think those are cases of lying or truth telling. You cannot lie about the future, because the future isn't fact, all you can do is be honest or dishonest about your current intent for the future.

[hellosailor]

Dan (ex-Calif) -
It probably would have been in the WSJ, or one of the reprints of the WSJ, but also could have been in the Journal Of Accountancy, which I see from time to time. As the specifics didn't apply to me, I didn't bother taking notes, or following it through.

Yes, it was presented as a major announcement. Apparently the court decision to treat rollovers was contrary to the existing IRS position and to a tax accountant or tax attorney, it is significant. I'm neither, which is why I said (again) consult a pro if it seems that it might apply. I'm sure the IRS themselves will be revising the relevant publications, probably by January or February to ensure taxpayers can get the right advice before April. Unless they feel a pang on conscience, and try to publish the change before the end of this tax year.(G)

[roverhi]

From what I can figure from trying to understand tax code legalease, yes it is true but only effects those who had matching contributions by their employer and only in the amount that the employer contributed. Apparently the employers contribution is now considered after tax contribution so can be rolled into a Roth tax free. It is only the amount that the employer contributed and does not include any appreciation of those funds while in the IRA.

Caution that I'm not a tax expert, don't even rise to the level of tax idiot. It is just what I could glean from an explanation of a so called expert from a reputable investment house. Unfortunately I've lost the link so can't point someone on the list to it who undoubtedly has more knowledge than I do. Interesting that notice of this change in the laws came to me from several different sources about the same time it was posted here so the word is going viral. Called our financial advisor and he was not aware of it.

[BandB]

Actually the recent tax court ruling on rollovers is tougher than the IRS had been. Here is the information, from the IRS site.

Current law
You don’t have to include in your gross income any amount distributed to you from a traditional IRA if you deposit the amount into another (or the same) traditional IRA within 60 days (Internal Revenue Code Section 408(d)(3)). Under Internal Revenue Code Section 408(d)(3)(B), only one IRA-to-IRA rollover can be made in any 12-month period. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii), published in 1981, and IRS Publication 590, Individual Retirement Arrangements (IRAs) interpret this limitation as applying on an IRA-by-IRA basis, meaning a rollover from one IRA to another would not affect a rollover involving other IRAs of the same individual.

U.S. Tax Court decision
The Tax Court recently held that you can’t make a non-taxable rollover from one IRA to another if you have already made a rollover from any of your IRAs in the preceding 1-year period (Bobrow v. Commissioner, T.C. Memo. 2014-21). Following the holding in this decision means:
you must include in gross income any previously untaxed amounts distributed from an IRA if you made an IRA-to-IRA rollover in the preceding 12 months, and
you may be subject to the 10% early withdrawal tax on the amount you include in gross income.
Additionally, if you pay these amounts into another (or the same) IRA, they may be:
excess contributions, and
taxed at 6% per year as long as they remain in the IRA.

Prospective application
The IRS intends to follow the Tax Court’s interpretation of Internal Revenue Code Section 408(d)(3)(B). However, to give IRA owners and trustees time to adjust, the IRS will delay implementation until January 1, 2015, at the earliest. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii) will be withdrawn and Publication 590 will be revised to reflect the new interpretation.

Only rollovers will be affected
This change won’t affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn’t a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers.

[transmitterdan]

Originally Posted by roverhi

From what I can figure from trying to understand tax code legalease, yes it is true but only effects those who had matching contributions by their employer and only in the amount that the employer contributed. Apparently the employers contribution is now considered after tax contribution so can be rolled into a Roth tax free. It is only the amount that the employer contributed and does not include any appreciation of those funds while in the IRA.

Caution that I'm not a tax expert, don't even rise to the level of tax idiot. It is just what I could glean from an explanation of a so called expert from a reputable investment house. Unfortunately I've lost the link so can't point someone on the list to it who undoubtedly has more knowledge than I do. Interesting that notice of this change in the laws came to me from several different sources about the same time it was posted here so the word is going viral. Called our financial advisor and he was not aware of it.

Rover,

I don't think this is correct which could be why your advisor doesn't know about it. The IRS will want taxpayers to pay income tax on conversions from IRA or 401K to Roth IRA regardless of the source of the contributions. No income tax was paid on the 401K contributions by the individual or the employer so the IRS is unlikely to allow money to flow into a Roth tax free (except for earnings).

[hellosailor]

Perhaps the advantage is not in the tax due, but in that the terms and age limits for distributions from the ROTH may be different from those of the 401K. Differences in distribution restrictions could mean as much as taxes themselves.

[waggy]

My guess is government cash flow... Bunch of money that will get taxed eventually when it's withdrawn but could be a long time before it is, vs. incentives to convert thereby generating cash now.

Be careful.

[deluxe68]

Originally Posted by captainbri

Really its so hard to get a loan its not funny. You think they sre crazy yet the government wont stop travel from ebola effected countries. Look what happend to the stock market. 25% of working people are unemployed. More people in the usa are below the poverty line than ever before. Think of me what you want but the facts are there. Ask yourself if ebola bresks out in america what will happen. Be glad you have a boat because that is where you will be.

Sent from my SAMSUNG-SGH-I537 using Cruisers Sailing Forum mobile app

Is this turning into a political thread?

[deluxe68]

From the following link:

How to Pump Up a Roth IRA - WSJ - WSJ



"How to Pump Up a Roth IRA
After-Tax Contributions to a 401(k) Plan Can Be Shifted Into a Tax-Free Roth, the IRS Says

High-income earners have a new incentive to make after-tax contributions to a 401(k) plan: They can later shift those contributions into a Roth individual retirement account, tax-free.

Thanks to a recent Internal Revenue Service ruling, eligible employees can now move after-tax contributions directly from their employer-sponsored retirement plan to a Roth account."

The article states that the IRS requires an employee contribute the maximum to a pre-tax 401K before they can contribute to an after-tax 401K. The article implies that the employers contribution to the pre-tax 401K is also considered pre-tax. That would mean you could not roll a pre-tax 401K into a Roth IRA without paying the tax first.