60-day rollover + conversion in same year

Submitted by Joseph Schwarz on Mon, 2020-11-09 20:16

Hi, I have a client who needs to do a 60-day rollover for a house purchase before the proceeds of their house sale come in a few days later. We also would like to do an IRA conversion before YE to fill up the lower tax brackets. Is there a preferred order for these two transactions or are there issues in completing both transactions before YE? I know that you can only do one 60-day IRA transaction/year, want to make sure the conversion does not cause any issues with the 60-day rollover. Thanks!



Submitted by Alan - IRA critic on Mon, 2020-11-09 22:14

  • Roth conversions do not count against the one rollover limitation, so there is no problem there. However, doing another IRA to IRA rollover with the 60 day deadline contingent on a real estate closing is very risky, since missing the deadline will leave client with a tax and penalty due on the distribution (plus tax on the conversion), and resulting loss of funds from his IRA. 
  • If the risk of not receiving the sale proceeds in time is an issue, it would be better to hold off on the conversion until the other funds are available to eliminate taxes on both, since conversions can no longer be recharacterized and the lower brackets could be filled by not being able to complete the rollover. Of course, with 2020 winding down there could be a time squeeze.

Submitted by Joseph Schwarz on Tue, 2020-11-10 14:20

Thank you Alan for your response!  

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