Pension Benefit 1099 R

[Tracy Lee]

TP receives two 1099R's from State Street Retiree Services for United airlines.  Gross Distribution shows $2149.94 and  $10,749.70, taxable amounts are blank.  The money he receives is because he gets it from the Pension Benefit Guaranty Corp, because United Airlines went bankrupt in 2002 and TP lost all his $80,000.00+ in employee stock ownership and his $30,000.00 + annual pension.  I can't seem to find alot of information on how much of this gross distribution is actually taxable.  TP knows nothing about it and prior tax preparer only claimed a small portion of it, but I have no worksheets to see why.  TP says he never had to fund anything into his pension or the employee stock ownership, so there would be no basis.  I will go back and ask TP to bring me all the 2020 tax data to see if I can piece it together.   Does anyone have any insight into this or links to see if it is all taxable or not?  I was wondering if it wasn't taxable because it is such a small amount compared to what he lost?

[TAXMAN]

I also would like to hear from others about this as I have a client that may be in the same situation.

[mcbreck]

I think you need to contact the plan administrator. My understanding is it is different for every person. Good luck.

I have a friend / client who worked at Ozark Air - was purchased by TWA. Then TWA's pension was raided by Carl Icahn, went bankrupt and were bought by American. He gets about 1/3rd of the pension he should receive. Part of his Ozark Air pension is non-taxable but it was rolled into TWA and then American so it was complicated.

[Abby Normal]

My guts says it's 100% taxable.

[Lee B]

4 minutes ago, Abby Normal said:

My guts says it's 100% taxable.

I agree, what would be the rationale for basis and less than 100 % taxability?

[Yardley CPA]

On 5/25/2022 at 6:33 PM, Tracy Lee said:

TP says he never had to fund anything into his pension or the employee stock ownership, so there would be no basis. 

Sounds 100% taxable to me.  I'll be curious to see what you find and why the prior preparer only claimed a small portion.  

[mcbreck]

Some pensions are tax free if part of the contributions were made with after tax income. Back in the 70's, that wasn't all that uncommon for employees to contribute after tax money and the corporation to contribute before tax money. That generates a portion being tax free. That's what happened with my client and their pension which was rolled into other pension plans via a merger. The only way to figure it out is for the plan to tell you via their actuaries.

[Yardley CPA]

5 hours ago, mcbreck said:

Some pensions are tax free if part of the contributions were made with after tax income. Back in the 70's, that wasn't all that uncommon for employees to contribute after tax money and the corporation to contribute before tax money. That generates a portion being tax free. That's what happened with my client and their pension which was rolled into other pension plans via a merger. The only way to figure it out is for the plan to tell you via their actuaries.

I agree...some early pensions did have after tax contributions, and I have several clients with this exact type of pension.  In the OP, it sounds like that was not the case...with the taxpayer having no recollection of ever contributing.  But maybe the prior preparer has some info, who knows.   

[Catherine]

The taxpayer may not remember, but the prior preparer, or the actuaries, may still have some useful information. I have also seen these partially non taxable pensions. Not from an airline, but from other industries.