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We have an IRA account and would like not to be penalized…

Customer Question
We have an IRA...

We have an IRA account and would like not to be penalized for a one time monetary gift of about 7k is there a way to do this or will we be taxed regardless

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Submitted: 24 days ago.Category: Tax
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5/29/2018
Tax Professional: emc011075, Tax adviser replied 24 days ago
emc011075
emc011075, Tax adviser
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Hi. My name is ***** ***** I will be happy to help you.

What is your age and to who do you want to gift it?

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Customer reply replied 24 days ago
58 and daughter
Tax Professional: emc011075, Tax adviser replied 24 days ago

You will not be able to do it. There are only couple of instances when you can transfer fund out of your IRA tax free:

- Make a charitable donation after 70 1/2 directly to a charitable organization

- transfer to your soon to be ex-spouse as part of property settlement

If you are not 59 1/2 the distribution will also be subject to 10% early distribution penalty, unless you qualify for one of the exception. Unfortunately making a gift to your daughter will not qualify you for an exception.

Fund in your IRA are pretax so somebody will have to pay tax on the distribution when the money leaves your IRA. A gift is not deductible by the donor and not taxable by the receiver therefore you cannot transfer tax liability from your to your daughter.

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Tax Professional: emc011075, Tax adviser replied 24 days ago

Any questions? IRA is a deferred retirement account and just like 401K it has to follow specific contribution/distribution rules. Unless your IRA is Roth IRA or funded with after tax (nondeductible) contributions, all distributions are taxable.

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