Pre-mature IRA distribution replacements
May an individual who prematurely takes a withdrawal from one traditional IRA successfully replace funds withdrawn within the 60 day window by utilizing an IRA transfer from other, separate IRA funds to replace in whole or part the amount withdrawn to avoid current year income taxes and the 10% penalty?
Permalink Submitted by mk foss on Wed, 2009-01-07 18:06
Yes, this can be done. There is even an example of this in IRS Pub. 590.
The once per year limit is per IRA. So you could take a distribution from IRA 1 in January – within 60 days you could take a distribution from IRA 2 and roll it to IRA 1; before the next 60 days have elapsed – you could take frunds from IRA 3 and repay IRA 1 and so on.
I hope that whoever does this can sleep nights. It would make me a nervous wreck.