IRA Distribution Intended as Indirect Rollover
I would appreciate any guidance you can provide on the following issue: An individual intended to complete an indirect rollover of his IRA from one institution to another, but instead took a distribution over 60 days ago and the funds are still not in an IRA. Are there any available remedies to avoid the tax consequences of this action? Is there any way to correct the distribution so that it becomes the intended indirect rollover? If not, should the individual place the funds into a new traditional IRA?
Relevant facts include:
Individuals date of birth is: 02.20.39
The traditional IRA was funded by roll over from a pension/ profit-sharing fund
Distribution date of the IRA funds is: 01.08.10
Check was issued to the individual by institution holding the IRA and then deposited by the individual into a taxable account at that institution. The money was then deposited at another institution in a taxable account in the name of the individual and that individual’s spouse.
Any guidance would be greatly appreciated.
Permalink Submitted by Alan Spross on Wed, 2010-03-10 03:33
The 60 days is measured from the received date, not the distribution date. IF he did not receive the funds on 1/8 he has another day or two.
If that will not work, and the amount warrants, he could apply for a PLR to allow the rollover. But also consider that he is subject to RMDs and unless he already took his 2010 RMD, the amount equal to the RMD would not be allowed to be rolled over in any event.
The fact that he did not use the money for other purposes would work to his benefit in a letter ruling. If he has any major health or family problems, that could also be cited in a letter ruling request.
Another possibility, although remote, is that if he was purchasing a qualified first home and the deal fell through, then he has 120 days to return the funds.