2015 Multiple R/Os-60 Day W/Ds [TIRAs & ROTH]
EMERGENCY-ASAP need HELP to evaluate TAX IMPLICATIONS & OPTIONS to MITIGATE FALLOUT of client’s PRIOR XRANS & SUBSEQUENT INTENTIONS (below):
She previously W/D $ for purchase of a new home [NOT 1st TIME BUYER], while waiting for her 1ST one to sell, from:
ROTH $165.9k on 02/13/2015
TIRA(#1) $78.8k on 02/11/2015
I just found out TONIGHT that TODAY [w/out discussing w/me 1ST] client initiated $235K W/D from her TIRA(#2) to be xrans into her bank A/C. Her intention was to replace W/Ds taken from ROTH & TIRA(#1) A/Cs (above) w/in the 60 Days.
THEN, her intention was to w/in 60 Days of $235K W/D initiated TODAY from her TIRA(#2) (above) to replace this W/D w/Home Sale Proceeds w/in the 60 Days [closing on 04/24/15].
<>??? My gut reaction is to have her do this, if possible, in order to allow few days to evaluate options, & avoid making things worse.
My specific concerns, among many other potential issues, are:
(A) 2015 NEW 1 R/O-60 Day W/D per YR Rule VS. on an A/C by A/C basis previously.
(B) Even if remote chance (A) isn’t a major problem & could change W/D xrans from her $235K W/D from her TIRA(#2) to a DIRECT TRUSTEE-to-TRUSTEE $165.9k xrans into ROTH, I believe xrans would be considered a ROTH CONVERSION & TAXABLE.
I see many potential issues & options w/this set of circumstances, but really need input ASAP!
THANK YOU!
ALAN, are you out there?
Permalink Submitted by Alan - IRA critic on Thu, 2015-04-02 03:49
Bad mess, exactly what the IRS intended to shoot down. If any way she can get a swing loan in 10 days for 245k, she could roll the 165k back to the Roth IRA (the one permittted rollover), and convert the 79k distribution to a Roth IRA and later recharacterize it back. That would not count as a rollover. Of course, she also needs to abort the current distribution as well, and that is the most urgent action needed. If the loan cannot be secured, then Plan B is based on the fact that the IRS does not have the authority to waive the one rollover limitation, however they do have the authority to extend the 60 day rollover deadline in certain cases. Therefore, the current distribution still needs to be aborted, and she would then use the sale proceeds to complete the one rollover she chooses. She would either lose the rollover for the Roth or the smaller one for the TIRA. Plan C would be a further variation if she can get a loan for 79k faster within 10 days. She then converts the 79k to a Roth and later recharacterizes it, and requests the IRS to extend the 60 days to complete the Roth IRA distribution rollover using the sale proceeds. Apparently, the IRA custodians did not provide any rollover warnings to her as well!
Permalink Submitted by DAVID DAMASKA on Thu, 2015-04-02 10:14
ALAN:As ALWAYS YOU ARE THE MAN & THANK YOU VERY MUCH!!!