Making a loan to a tax-exempt organization from 401(k) retirement investment funds?
I'm age 64 & considering making a short term personal loan with interest to a tax-exempt organization. The loan would be payable in total with interest in two years or upon organization's sale of land, whichever occurs first. Funds would be sourced from my retirement investment account. I'm retired now & the loan will not jeopardize my portfolio.
Would I be taxed at my personal income tax rate upon withdrawal of the funds for this loan from my professionally managed, balanced 401k (not Roth funds)? My investment institution offers a gifting account but I'm not sure a transfer to this account would result in an exemption on personal income tax on the loan funds.
If taxable, this would move me to the next higher tax bracket.
Whether or not taxable when pulling funds out of the investment account, when I'm repaid, do I owe Federal tax only on the interest income portion of repayment funds or on the lump sum & interest received (all of which which would return to my retirement account in lump)?
I realize that I would not be eligible to take a federal tax deduction unless I "contribute" the money and I believe the maximum annual deductible contribution is 50% of my annual AGI so if I go this route it matters whether or not the balance is considered personal income.
Thanks.
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Would I be taxed at my personal income tax rate upon withdrawal of the
funds for this loan from my professionally managed, balanced 401k (not
Roth funds)?
Yes. This is a regular distribution. Why wouldn't you be taxed?
What's gifting has to do with anything?
If taxable, this would move me to the next higher tax bracket.
Depending on your other income - it may, or may not.
Whether or not taxable when pulling funds out of the investment
account, when I'm repaid, do I owe Federal tax only on the interest
income portion of repayment funds or on the lump sum & interest
received (all of which which would return to my retirement account in
lump)?
Only interest.
And you will not return it to your retirement account. Not in a lump and not in installments and not in any other way.
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