13) If a lump-sum nonqualifying distribution consists of employer securities, the net unrealized income thereon is (1) not includible in income, (2) not included in the basis of the securities, and (3) capital gain when realized in a subsequent taxable transaction.
A nonqualifying distribution from a designated Roth account is treated much differently than one from a Roth IRA.
16) Thus, if the nonqualifying distribution is made before the annuity starting date, the amount includible in gross income as an amount allocable to income and the amount not includible in gross income as an amount allocable to investment in the contract are determined under Sec.
For instance, assume that an individual, before the annuity starting date, takes a nonqualifying distribution of $10,000 from a designated Roth account with a value of $25,000.
Thus, if more than one account of a beneficiary is rolled over in a 12-month period, such action would constitute a nonqualifying distribution subject to taxation.
nonqualifying distributions in excess of a base amount to dependent children under age 18 will be taxed at the parents' marginal tax rates (rather than the child's)).
Withdrawal penalties: Nonqualifying distributions are taxed at ordinary income tax rates.