Ineligible Rollover to an Inherited BBA Question
Hello,
I have a client that made an ineligible rollover contribution to their inherited IRA account. The custodian is able to do a deposit correction for the original contribution amount but what can be done with the earnings? Can the basis and earnings be removed as a return of excess distribution form the inherited IRA or will the earnings simply need to be removed as a taxable distribution?
Any feedback would be greatly appreciated. Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2024-10-22 11:20
Where did the distribution come from, from a plan that the client owned? Was the deposit to the inherited IRA done by direct rollover from an employer plan, direct transfer from an owned IRA, a transfer from another beneficiary account or an actual 60 day rollover? What account did the client intend to roll the funds to, an owned IRA?
Generally, the contribution will be disallowed, and the best fix would be for the custodian to remove the contribution with allocated earnings, with the earnings being taxable. That might allow time to roll the funds (but not the earnings) over to the intended account.
What was the date of the disallowed rollover to the inherited IRA? And was this a new inherited IRA account or an existing one with a prior balance?