60 day rollover
My client took a distribution from his IRA. If he establishs a new IRA with the same custodian and deposits his distribution into the new IRA within the 60-day time period, can he avoid the tax liability of the original distribution? Please advise. Thanks.
Permalink Submitted by Alan Spross on Fri, 2010-09-24 22:11
It depends.
Only one rollover from an IRA account or from an IRA account that receives a rollover contribution is allowed over a 12 month period. Therefore, the tax liability can only be avoided if he did not roll over another distribution from that first IRA in the prior 12 months.
If he has already used up his one rollover from that IRA in the last 12 months and the distribution is large enough, there is a way out. He could convert the distribution to a Roth IRA within 60 days and then recharacterize the conversion at a later date. A conversion does not count as a rollover for this purpose.
Also, if he is allowed the current rollover, he must then remember not to attempt another rollover from the first or the second IRA within the NEXT 12 months. So if the client only wanted to take the distribution to create another IRA account, he should have done so by a direct trustee transfer rather than an indirect rollover. Transfers are NOT limited in number.
Permalink Submitted by Harry Archer on Fri, 2010-09-24 22:41
Am I correct that using the same custodian to establish the new IRA (separate account number) is OK? Thank you.
Permalink Submitted by Alan Spross on Fri, 2010-09-24 22:57
Yes. It does not matter if the custodian is the same or a new one. The above rules apply equally in each case.
Permalink Submitted by Ed Dedon on Tue, 2013-07-02 20:12
If two distributions were taken from one IRA and the total amount of both distributions was rollover to the same IRA within 60 days of the receipt of the first distribution would it be a qualified rollover? Does the one time pertain to the rollover per year or does the two distributions and subsequebnt one rollover not qualify?Please advise. Thanks.
Permalink Submitted by Alan - IRA critic on Tue, 2013-07-02 22:19
It would not qualify. The one rollover rule is determined by the number of distributions, not the number of rollovers. Therefore a single distribution can be rolled over to two different IRAs on different dates, but distributions on different days from the same IRA account cannot both be rolled over within 12 months of the date of the first distribution. If you took two distributions, since only one can be rolled over you could elect the largest distribution for the rollover.