60-day Rollover
Can someone confirm the following scenario is permitted without taxation:
Redeem $100 from IRA #1
Redeem $100 from IRA #2 (payback IRA #1 within 60 days)
Redeem $100 from IRA #3 (payback IRA #2 within 60 days)
Payback IRA #3 60 days.
Thank you.
Permalink Submitted by Alan Spross on Fri, 2010-01-15 03:10
Yes, this is permissible because you have done only one rollover distribution from each IRA account. But the 3 accounts must have been set up by direct transfer OR by a rollover done at least one year prior to issuing a distribution to be rolled over.
Now, if this scenario were carried to a ridiculous extreme, the IRS could possibly challenge that the only purpose these accounts were set up for was to evade the rollover limitation. But to my knowledge this has never happened and it would take far more accounts than this to create the possibility of a problem.
Permalink Submitted by mk foss on Fri, 2010-01-15 18:12
IRS Publication 590 gives an example that shows that the scenario described works. I’ve seen tax returns with far more serial rollovers than 3 and the IRS has not had a problem with them.