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What is considered a "economic loss" for a Hurricane Wilma 401k distribution? Would it be any amount of loss? Does the distribution have to equal the amount of the loss? Can the distribution be more than the amount of the loss?

Submitted: 778 days and 12 hours ago.

Category: Finance

Value: $15

Status: CLOSED

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Trinity, Florida

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Accepted Answer

According to the IRS - http://www.irs.gov/newsroom/article/0,,id=152734,00.html and IRS Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma - http://www.irs.gov/pub/irs-pdf/p4492.pdf
The IRS provides examples of an economic loss that include, but are not limited to:
Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause;
Loss related to displacement from your home; or
Loss of livelihood due to temporary or permanent layoffs.
The IRS doesn't provide any limit on amount of loss and doesn't relate the amount of loss to the amount of distribution, but states that qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss.
The total of your qualified hurricane distributions from all plans is limited to $100,000.

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Expert:	Lev
Pos. Feedback:	99.1 %
Answered:	10/6/2007

Tax Preparer

Personal Investment, Tax Preparation

778 days and 10 hours ago.

Reply

Reply to Lev's Post: Hello Lev. Thanks for the response.

I had read the "qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss" statement in the IRS documentation. The distribution was for over $13,000 and the actual loss was a fraction of that amount. I just wanted to make sure I was interpreting the statement correctly.

Thanks.

Posted by Lev 778 days and 10 hours ago.

Answer

This is correct - amount of loss and distribution are not connected is the economic loss met IRS guidelines.

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