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Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: Brendan W who wrote (940)	4/5/1998 1:28:00 PM
From: Brendan W	Read Replies (1) \| Respond to of 5810

Colin, can my parents pay my HMO "dues" without counting toward the $10,000 annual gift limit? This would be a wealth transfer mechanism. I guess my question is do HMO dues qualify as medical expenses?

To: Brendan W who wrote (940)	4/5/1998 2:34:00 PM
From: Colin Cody	Read Replies (1) \| Respond to of 5810

Brenden, Get IRS Pub 590 or any other IRA publication. You will see that ANY debt incurred by an IRA disqualifies it retroactive to the beginning of the year. Here's you problem: You may go you merry way for years and no one will ever find out. Or the problem surfaces. In that case the fact that your IRA was disqualifies "many many years ago" means you under paid the taxes in THAT YEAR. If the amount of under reporting is less than say 25% of your AGI for that year, then the Statute of Limitation protects you, IMO. BUT since your non-IRA funds are inside of an IRA you ARE subject to the overfunding penalty, I think this is 10% per annum from the date of the overfunding. i.e. in 15 years you will owe the IRS MORE than the balance in the IRA. I would suggest immediate action to mitigate your potential damages here. Start with getting IRS publications on IRAs and reading them cover to cover. This IS SERIOUS, even though I know you are thinking, hey it was "only twenty bucks". The COURTS have NOT been easy on taxpayers, because the LAW that CONGRESS WROTE does not allow any flexibility. If the $$ are large enough, see a GOOD (i.e. expensive) Tax Attorney, pronto. Good luck! Colin