roth question
client over the age of 59 1/2, has taken distributions from IRA, now wants to contribute these distributions to roth for an equal amount, is this the same as a roth conversion in the eyes of the IRS?
client over the age of 59 1/2, has taken distributions from IRA, now wants to contribute these distributions to roth for an equal amount, is this the same as a roth conversion in the eyes of the IRS?
Permalink Submitted by Alan Spross on Mon, 2008-11-24 16:38
Yes. The rollover must be done within 60 days of the distribution. If the distribution was taken last week, the 60 day period extends beyond the end of the year. That is OK, and will count as a 2008 conversion so the client must be income eligible for conversion in 2008.
When contributed to the Roth, the Roth custodian should be told that this is a rollover conversion from a traditional IRA. It is not treated as a regular contribution in that case.
Finally, since he is over 59.5, there is no 5 year holding requirement for Roth conversions to avoid the early withdrawal penalty.
Permalink Submitted by mark gregoreski on Mon, 2008-11-24 18:44
what if most of the IRA distributions were taken past 60 days?
Permalink Submitted by Alan Spross on Mon, 2008-11-24 23:10
Then the deadline for rollover has passed unless the client qualifies for an exception to the 60 day time limit. Some of the exceptions include IRA custodian error or if the client was unable to complete the rollover due to illness, incarceration, etc. If that’s the case, client could apply for a letter ruling from the IRS requesting an exception.
If some of the distributions were under 60 days, client should get them converted ASAP prior to the expiration of the 60 day period.