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February 16, 2009

Nonqualified distribution

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Definition

A distribution from a Roth IRA or ESA that does not meet the requirements to be treated as a Qualified distribution- ESA  or a Qualified distribution- Roth IRA

Referring Cite

IRC §530, IRS Publication 970, IRC §408A (d)(2), IRC §408A(d)(5), IRS Publication 590

Additional Helpful Information

  • Nonqualified distributions may be subject to income tax and early distribution penalties
  • For Roth IRAs, the ordering rules are used to determine if a distribution is subject to income tax and/or the early distribution penalty
  • For ESAs, the  amount attributable  to earnings on a nonqualified distribution may be subject to income tax and the early distribution penalty
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