Sixth Circuit Panel Finds IRS Cannot Use Substance Over Form to Recharacterize DISC-Roth IRA Structure

A Sixth Circuit panel in the case of Summa Holdings Inc. v. Commissioner, No. 16-1712, CA6 reversed the Tax Court in case involving transactions involving a Domestic International Sales Corporation (DISC) and a Roth IRA should be recharacterized as being a method of making impermissibly large contributions to the Roth IRA. 

The case concludes by noting:

The last thing the federal courts should be doing is rewarding Congress’s creation of an intricate and complicated Internal Revenue Code by closing gaps in taxation whenever that complexity creates them.

Image copyright lightwise / 123RF Stock Photo

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Late Recharacterization Allowed to Taxapayer Who, Through a Series of Errors, Converted Far More to a Roth IRA Than Intended

Sometimes things don’t go exactly as planned—and multiple errors cascade to create an issue.  That was the case for the taxpayer who requested PLR 201617019

In this case the taxpayer wished to deposit after tax funds into a new traditional IRA.  The taxpayer already had an existing traditional IRA, but he did not want the funds going into that IRA since he planned to convert the funds in the new IRA to a Roth IRA.  

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