Tax Type
Individual Income Tax
Description
Addition for lump-sum distribution qualified for federal averaging
Topic
Taxable Income
Date Issued
09-26-1985
September 26, 1985
Re: Virginia Code Section 58.1-1821 Application
Individual Income Tax
Dear ****
This is in reply to your letter of July 26, 1985 in which you apply for correction of the assessment of additional individual income tax for taxable year 1984.
FACTS
During taxable year 1984 you received a distribution that qualified under Internal Revenue Code Section 402 for the special ten-year averaging method applicable to qualified lump-sum distributions. For federal income tax purposes you chose to only subject the ordinary income portion of the lump-sum distribution to the special ten-year averaging. You reported 4O% of the capital gain portion of the distribution on line 14 of your federal Form 104O.
For Virginia purposes, you reported the ordinary income portion less the minimum distribution allowance on line 24 of your Form 760 as an addition to federal adjusted gross income. Your return was examined by the department and the amount reported on line 24 was increased. This increase was the result of the department reducing the amount of the minimum distribution allowance. The assessment that resulted from this adjustment was issued on July 19, 1985.
You contest the validity of this adjustment and apply for correction of the assessment.
DETERMINATION
Virginia Code Section 58.1-322 B.4 requires the addition to federal adjusted gross income of:
This Virginia modification to federal adjusted gross income is further explained in the Virginia Individual Income Tax Regulations under §63O-2-322(B)(3). This section states in part:
In accordance with this regulation, you filed your return properly and reported the correct amount of addition to federal adjusted gross income. The assessment will be abated.
Sincerely,
W. H. Forst
Tax Commissioner
Re: Virginia Code Section 58.1-1821 Application
Individual Income Tax
Dear ****
This is in reply to your letter of July 26, 1985 in which you apply for correction of the assessment of additional individual income tax for taxable year 1984.
FACTS
During taxable year 1984 you received a distribution that qualified under Internal Revenue Code Section 402 for the special ten-year averaging method applicable to qualified lump-sum distributions. For federal income tax purposes you chose to only subject the ordinary income portion of the lump-sum distribution to the special ten-year averaging. You reported 4O% of the capital gain portion of the distribution on line 14 of your federal Form 104O.
For Virginia purposes, you reported the ordinary income portion less the minimum distribution allowance on line 24 of your Form 760 as an addition to federal adjusted gross income. Your return was examined by the department and the amount reported on line 24 was increased. This increase was the result of the department reducing the amount of the minimum distribution allowance. The assessment that resulted from this adjustment was issued on July 19, 1985.
You contest the validity of this adjustment and apply for correction of the assessment.
DETERMINATION
Virginia Code Section 58.1-322 B.4 requires the addition to federal adjusted gross income of:
-
- Forty percent of the capital gain part and all of the ordinary income part of a lump-sum distribution from a qualified retirement plan, less the minimum distribution allowance and any other amount excludable for federal income tax purposes.
This Virginia modification to federal adjusted gross income is further explained in the Virginia Individual Income Tax Regulations under §63O-2-322(B)(3). This section states in part:
-
- Individuals who elect to use the 10-year averaging method for computation of the tax on a lump sum distribution from a qualified employee's trust shall add to FAGI: ... (ii) all of the ordinary income portion where the 10-year averaging method is not used for the capital gain portion. The amount to be added is reduced by the minimum distribution allowance and any amount excludable for federal income tax purposes ....The minimum distribution allowance for state purposes is the allowance computed for federal purposes and may not exceed the taxable (4O%) portion of the capital gain (if such gains are included in the 10-year averaging election) plus the ordinary income portion of the distribution.
In accordance with this regulation, you filed your return properly and reported the correct amount of addition to federal adjusted gross income. The assessment will be abated.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner