[GNC] How to treat IRA distribution as income

[Michael or Penny Novack]

On 12/26/2024 11:30 PM, Bob Plantz wrote:
> I realize that an IRA distribution is not income, but the (USA) IRS treats it as income. My IRA is in a mutual fund, and I sell shares to create a distribution. The bulk of the money from that sale goes into my bank account, another portion goes to the IRS for withholding tax, and the third portion to my state withholding tax.

First of all, a regular IRA (not a Roth) or 401k distribution IS taxable 
income. Remember, when the money was put in it did NOT count as taxable 
income. It is income your were allowed to "defer". If at that time you 
had recorded it as "deferred income" your path forward would be clearer.

Distribution transaction

     debits     cash, deferred income

             credits    IRA balance,  income

Where in the CoA you would put an account like "deferred income" depends 
on what you wanted your books to show (with regard to your total income 
for tat earlier year). This is perhaps simpler for IRA/401k than more 
complicated conditional compensation like "split dollar". But even with 
IRA/401k there can be conditional complications. For example, were 
matching employer contributions involved? How soon "vested" (and how did 
you handle that?)

Michael D Novack