RMD via Trustee-to-Trustee Transfer
Obviously, RMDs are not eligible for rollover distribution purposes. But, are RMDs eligible for direct rollover (trustee-to-trustee) distribution purposes? In other words, let’s say a 75 year old IRA owner has not taken his 2008 IRA required minimum distribution and now wants to move the entire account balance via trustee-to-trustee transfer to a new custodian. Is the IRA owner, or the custodian, required to have distributed or withhold the RMD amount for 2008 or is the full balance eligible for the trustee-to-trustee transfer?
I always thought that ANY amounts distributed either for rollovers or trustee-to-trustee transfer purposes were first treated as amounts required for minimum distribution purposes and therefore required to be withdrawn by the owner or distributed by the custodian.
Either way, is there an IRC or source that references this?
Thanks for your help!
Permalink Submitted by Alan Spross on Tue, 2008-03-04 20:29
The full balance is eligible for transfer, since a trustee to trustee transfer is not considered a distribution and rollover. The clearest IRS explanation of this distinction is the following pasted section from the summary section of the 2002 IRS RMD Regulations:
>>>>>> >>>>>>>>>
Although the IRA to IRA transfer is not
treated as a distribution for purposes of
section 401(a)(9), in light of the fact that
the required minimum distribution with
respect to the transferor IRA can be
taken from any IRA, the transferor IRA
will be able to transfer the entire
balance and will not be required to
retain the amount of the required
minimum distribution for the year.
>>>>>> >>>>>>>>>>
Note that this paragraph does not apply to Roth conversions. While these can be physically done by direct transfer, they are treated differently for reporting purposes as distributions and rollovers. Therefore, the RMD needs to be satisfied prior to doing a Roth conversion, even though it can be satisfied by taking the full RMD from any of the owner’s TIRA accounts.
Permalink Submitted by Scot Stark on Tue, 2008-03-04 20:34
Got it! Thank you!