Accounting Treatment of Taxable IRA Distributions

[Les]

On 05/07/2013 05:57 AM, Mike or Penny Novack wrote:
>
>> You misunderstand. The IRA is an asset, the distribution from the IRA is
>> income which decreases the IRA account and increases the Income account
>> and increases the bank (cash) account.
>>
>> Les
>>
>>  
>>
> No, I don't misunderstand.
>
> The transfer of amounts between one asset account an another isn't
> "income". You are confusing that because it is a tax deferred account
> you have to report this as income for tax purposes. Heck, in this case
> there is actual money amounts (in other cases you may have to report
> "implied" income amounts to the government even though you haven't
> actually received any money --- for example, that portion of employer
> contributed insurance premiums for the part of the policy > $50,000)
>
> In your income tree, have you been carrying all along a child for
> "deferred income"? (in other words, HOW were you accounting for the
> contributions you made to the IRA and how were you accounting for the
> unrealized gains in the account). If you had been you would not be
> having any problem as the transaction would be IRA => checking account
> and deferred income => current income. My description of what to do
> now was assuming that you had not been doing that. Income and expense
> accounts are actually (temporary) accounts of fundamental type equity.
>
> In traditional bookkeeping income and expense accounts are closed to
> equity at the end of each accounting period. Only asset, liability,
> and equity accounts are standing. That's why I would have put the
> "deferred income" account as a child under equity.
>
> Michael
>
>
I now understand your logic.  However, in my case, I am retired and
cannot make contributions.  I am on a cash basis and only recognize
income and expenses when they occur.  When I take a distribution, I
record the distribution as income and an increase in my cash account. 
This is probably not proper accounting but it works for me and I like
the "kiss" system.

Les