Whether it was Ben Franklin or some earlier sage who first said it, the sad tale of Jon M. Beachey, Docket No. 20625-23, filed 4/1/25, is no April Fool’s joke.

Jon’s ex-wife died, and it fell to him to pay for her funeral. He took a $15K IRA draw in year at issue and rolled all but $1K thereof into a new IRA the following year, well beyond the 60-day safe harbor. Jon didn’t report the draw, claiming it was a loan he repaid.

Judge Nega is sympathetic (who wouldn’t be?), but the IRC is immutable and unforgiving.

“Section 408 includes exceptions for rollover distributions, transfers incident to divorce, and distributions for charitable purposes. Sec. 408(d)(3), (6),(8). There is no exception for petitioner’s circumstances. See Adams v. Commissioner, T.C. Memo. 2015-162 at *8 (“There is no exception for distributions used to defray ordinary living expenses following the loss of a job or other misfortune.”)

“In fact, there is no exception whatsoever for loans taken from IRAs. Patrick v. Commissioner, T.C. Memo. 1998-30 n.8, aff’d without published op., 181 F.3d 103 (6th Cir. 1999). If such a loan were made, the IRA will lose its exemption and all assets would be deemed distributed. Id.; Sec. 408(e)(1) and (2).” Transcript, at pp. 5-6.

And of course Jon blew the rollover exception. And was under age 59-1/2 in year at issue.

Death and taxes are inevitable and painful.