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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I believe that the IRS allows tax free withdrawals from individual

Resolved Question:

I believe that the IRS allows tax free withdrawals from individual 401K programs for the purpose of giving gifts. How does one go about this, so that the giver is not penalized?
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.

LEV :

Hi and welcome to Just Answer!
You are correct - you may gift funds from your 401k plan without taking distributions and that amount will not be included into your taxable income if you rollover funds into an IRA account and structure the gift as a Qualified Charitable Distribution (QCD).
Please consider following:


- the IRA owner must be at least 70 1/2.


- the limit for charitable gifts is $100,000


- the money must be rolled over directly to the charity


- no charitable deduction for the gift is allowed.
See more details here - http://www.irs.gov/retirement/article/0,,id=234258,00.html.
Let me know if you need any help or clarification.

Customer:

The information that need applies to the Uniform Transfer to Minors Act (Section 529, I think). Can funds be transfered from an IRA/401K for this purpose? Where can I find the IRS language that authorizes this type of transfer?

LEV :

The information that need applies to the Uniform Transfer to Minors Act (Section 529, I think). Can funds be transferred from an IRA/401K for this purpose?
You may transfer funds to another person only after distribution. The UTMA doesn't provide the option for tax free rollover.
Where can I find the IRS language that authorizes this type of transfer?
The tax free transfer is not available in case the funds are transferred to another individual. You may not find that in any IRS publication because it is not exist.
Here is the text of the UTMA with comments - http://www.law.upenn.edu/bll/archives/ulc/fnact99/1980s/utma86.pdf .
Here is the IRS publication this matter - http://www.irs.gov/pub/irs-pdf/p575.pdf

Customer:

Thank you.

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