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OUST current position on 401k Distributions?
Larry:
I don't see how anyone is going to care about a "presumption of abuse"
in a case that is paying 100% to creditors. It seems the presumption of
abuse can be easily overcome by that. The UST will not want to see that
case go away. The Chapter 7 Trustee is only an intermediary at best.
I'd not spend much time worrying about it, and I cannot see the Chapter
7 Trustee wanting an asset case to be dismissed.
Steve
Steven B. Lever
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I have a CH7 where the debtors failed to tell me they were taking monthly
withdraws from their 401k. They also did not know they had long ago
received tenant in common interests in a parent's trust properties; so this
is an asset case that will pay creditors 100%.
As to the 401k distributions, we filed their petition before they had their
2013 taxes; so I didn't see the distributions. The trustee has the 2013
tax returns and has focused on IRA distributions in 2013 that are within the
six month pre filing range. Trustee demanded an accounting of the IRA
distributions for 2012 and 2013 and is dragging the debtors back in for
"questions on the record". I believe the trustee may ask for an amended
Means test and SOFA; which raises the issue of 401k distribution as income.
In this case including the 401K distribution triggers the presumption of
abuse by about $120/month.
I have read the email discussion here and read IN RE ZAHN , IN RE CRAM and
several other 9th circuit cases. I agree with the case law that says a 401k
distribution is income when received, not income when distributed. HOWEVER
as I understand the OUST Statement on legal issues 401k and IRA are
included as income.
Question; does anyone know the OUST logic or reasoning for the 401k
distribution as income position?
Best Regards
Larry Webb
Law Office of Larry Webb
484 Mobil Ste 43
Camarillo, Ca 93010
805-987-1400
http://www.thousandoaksprobate.com/
Email Larry@webbklaw.com
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