IRA 60 day loan rules

Submitted by Bob Lloyd on Sun, 2017-05-21 13:21

I have two traditional IRAs, each with a different national custodian. Lets call them A and B. I wish utilize the 60 day rule to obtain funds to bridge the gap between buying a new home and selling our existing home. The RMD for the B account has been taken. The A account is set up so I get 1/12 of the RMD each month to meet living expenses, so that total 2017 RMD has not been taken. So my question is can I utilize the 60 day rule to obtain funds from the B account.



Submitted by Alan - IRA critic on Sun, 2017-05-21 16:29

Yes, since you completed the B account RMD already, you can roll over a distribution from the B account within 60 days as long as you have not done another 60 day rollover from ANY of your IRAs in the last 12 months. IRA loans connected to real estate deadlines are very risky since the entire process is not within your control. However, if you miss the deadline the B account distribution will be credited against your total RMD, so you could then stop the monthly A account distributions once your total RMD has been met.

Submitted by Ben Meyer on Mon, 2017-05-22 01:13

  • Would this approach have any risk since the total amount of RMD from A+B has not yet been taken?  Would any further distribution from account B be deemed as RMD to the extent that the RMD from account A is not completed, and therefore be ineligible for rollover?  That seems to be the implication of the following rule:

1.408-8, A-4. The portion of a distribution that is a required minimum distribution from an IRA and thus not eligible for rollover is determined in the same manner as provided in A-7 of § 1.402(c)-2 for distributions from qualified plans. For example, if a minimum distribution is required under section 401(a)(9) for a calendar year, an amount distributed during a calendar year from an IRA is treated as a required minimum distribution under section 401(a)(9) to the extent that the total required minimum distribution for the year under section 401(a)(9) for that IRA has not been satisfied. …

  • The second sentence of the rule above seems to say that a distribution from any IRA is considered to be a RMD if the total RMD for the year is not yet satisfied.
  • See also the rule of 1-402(c)-2, A-7(a):  General rule. Except as provided in paragraphs (b) and (c) of this Q&A, if a minimum distribution is required for a calendar year, the amounts distributed during that calendar year are treated as required minimum distributions under section 401(a)(9), to the extent that the total required minimum distribution under section 401(a)(9) for the calendar year has not been satisfied. Accordingly, these amounts are not eligible rollover distributions. 
  • Considering that account A is making monthly distributions, the question would need to be reviewed with the specific amounts taken into consideration, for the monthly amounts from account A and the additional amount from account B for the gap loan.

 

Submitted by Alan - IRA critic on Mon, 2017-05-22 04:32

  • There is some key verbiage in A-4 that can be interpreted in different ways. Note that there is a final sentence to A-4 that clarifies that the earlier reference to “that” IRA actually means a single IRA account as opposed to other IRA accounts. The last sentence reads as follows –  “This requirement may be satisfied by a distribution from the IRA or, as permitted under A-9 of this section, from another IRA.”  Therefore, despite the RMD aggregation rules that apply for IRA accounts, if the RMD for “that IRA” has been satisfied, additional amounts distributed from ” that IRA”  account are rollover eligible because they are not considered RMDs. But if the additional amount distributed is not rolled over, then the additional distribution is an RMD under the aggregation rules that can satisfy the RMD for other IRA accounts..
  • I read somewhere that this confusing rule was adopted to shield taxpayers who did not understand the RMD aggregation rules for IRAs (or 403b accounts) from excess contribution situations caused by rolling over a distribution after the RMD for a particular account was satisfied, but not the total RMD..
  • The taxpayer is then allowed to complete the RMD for any IRA account, and once that RMD is complete they can roll over additional distributions that would otherwise satisfy the RMD for other accounts under the aggregation rules. The IRS never attempts to explain this in the IRA Pubs, and I can see why. I also understand that this interpretation may not fly with some IRS personnel.

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