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  1. #1
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    Sep 2006
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    chicago,Il
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    Question Double Taxing of IRA Distribution for Divorce Agreement

    My question involves divorce in the State of: Illinois
    Divorce agreement requred me to withdraw 30k from my IRA and put into ex-wife bank account.
    I payed taxes on that distribution and deposited check into her bank.
    Is she obligated to pay taxes on that money?
    Thanks, Mike

  2. #2
    Join Date
    Sep 2010
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    19,478

    Default Re: Double Taxing of IRA Distribution for Divorce Agreement

    Hold the phone. Did you have a QDRO? What taxes did you pay (did you know you may only have been required to pay the 10% penalty on half of it)? Does she want to spend the money now, or does she intend to roll it over into another IRA? Where was your lawyer when all this was set up?

    Chances are she doesn't owe any taxes on what she received if you paid them (hopefully that was taken into account in the calculations of the division of assets).

  3. #3
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    chicago,Il
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    Default Re: Double Taxing of IRA Distribution for Divorce Agreement

    Just this: I took money from my IRA as normal distribution, received form 1099R with taxable amount, and payed income tax on it.
    She endorsed my IRA check, and deposited in her bank account. I think IRS could have questions, seeing a large sum appered on her account. they may think it's a gift or undecleared income and will ask for explanation. So, I'm worry if ex-wife will be taxed again+ penalties etc

  4. #4
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    Sep 2010
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    Default Re: Double Taxing of IRA Distribution for Divorce Agreement

    You didn't answer the question.
    We can't answer the questions without it, really.
    The IRS generally doesn't going to look through people's bank accounts.
    The recipients of such things (which I have no idea whether it was just division of marital property under a qualified order or an ad hoc distribution which be a gift) don't generally owe any taxes on it. You however may be obligated to file gift tax and this may apply towards your lifetime exclusion.

  5. #5
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    Sep 2006
    Location
    chicago,Il
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    Default Re: Double Taxing of IRA Distribution for Divorce Agreement

    I'm trying to be clearer. I and wife wrote all that marital property division agreement. Our lawer just submitted that papers to the case. court approved officially our divorce. We don't have separate QDRO. I literraly followed the agreement. Do you belive IRS may concider it as gift and tax my ex-wife or me additionaly?

  6. #6
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    Sep 2010
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    Default Re: Double Taxing of IRA Distribution for Divorce Agreement

    If it was pursuant to a divorce settlement (and I'd definitely keep track of some documentation that it was), then it's not subject to gift tax.

    The recipient doesn't pay any (federal at least) gift tax.
    The donor may owe some, but you have a $1M lifetime exclusion that you've probably not likely hit yet.

  7. #7
    Join Date
    Sep 2006
    Location
    chicago,Il
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    9

    Default Re: Double Taxing of IRA Distribution for Divorce Agreement

    Thanks a lot.

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