Distributions That Do Not Qualify for the 20% Capital Gain Election or the 10-Year Tax Option
The following distributions are not qualified lump-sum distributions and do not qualify for the 20% capital gain election or the 10-year tax option.
- A distribution that is partially rolled over to another qualified plan or an IRA.
- Any distribution if an earlier election to use either the 5- or 10-year tax option had been made after 1986 for the same plan participant.
- U.S. Retirement Plan Bonds distributed with the lump sum.
- A distribution made during the first 5 tax years that the participant was in the plan, unless it was paid because the participant died.
- The current actuarial value of any annuity contract included in the lump sum (the payers statement should show this amount, which you use only to figure tax on the ordinary income part of the distribution).
- A distribution to a 5% owner that is subject to penalties under section 72(m)(5)(A).
- A distribution from an IRA.
- A distribution from a tax-sheltered annuity (section 403(b) plan).
- A distribution of the redemption proceeds of bonds rolled over tax free to a qualified pension plan, etc., from a qualified bond purchase plan.
- A distribution from a qualified plan if the participant or his or her surviving spouse previously received an eligible rollover distribution from the same plan (or another plan of the employer that must be combined with that plan for the lump-sum distribution rules) and the previous distribution was rolled over tax free to another qualified plan or an IRA.
- A distribution from a qualified plan that received a rollover after 2001 from an IRA (other than a conduit IRA), a governmental section 457 plan, or a section 403(b) tax-sheltered annuity on behalf of the plan participant.
- A distribution from a qualified plan that received a rollover after 2001 from another qualified plan on behalf of that plan participants surviving spouse.
- A corrective distribution of excess deferrals, excess contributions, excess aggregate contributions, or excess annual additions.
- A lump-sum credit or payment from the Federal Civil Service Retirement System (or the Federal Employees Retirement System).