60-day rollover trail
Does the one rollover in a 12-month time period “follow” the assets? For example, if a client transacts a rollover from IRA #1 and timely deposits those assets back into IRA #1, can they turn around and [u]journal[/u] those assets to a new IRA #2 and then transact a 60-day rollover within that IRA #2, using the assets journaled from IRA #1?
Based on 590, it seems as though this would not be allowed because it states “You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover”, but I’d like confirmation that I’m reading this correctly.
Permalink Submitted by Alan Spross on Tue, 2010-11-30 22:06
I am not aware of the IRS ever “looking through” the intervening direct transfer to a 2nd IRA account and deeming that second account subject to the 12 month waiting period for further rollovers from the 1st account rollover date. Same basic situation as rolling A to B, then directly transferring B to C and then rolling over a distribution from C.
The IRS does not pursue any tracing rules with respect to which assets move in various transfers and since transfers are not even reported on 1099R or 5498, it is likely that there are a few million rollovers every year that involve a second rollover of certain assets that have moved through several different accounts.
As we know, there is no reporting of the dates of either transfers or rollovers to the IRS, so both the 60 day limit and the one rollover rule are inconsistently enforced at the IRA custodian level only. I suppose in an extreme case in which an IRS audit exposed the actual transaction dates, the IRS might take the position that there was a constructive taxable distribution followed by an excess contribution, but the odds of it happening in any particular case are miniscule.
Permalink Submitted by John Hemphill on Thu, 2010-12-02 20:58
Does 60 day rule apply to a beneficiary IRA (non spouse is beneficiary)> That is, non spouse beneficiary requests that the IRA (before being registered in non spouse beneficiary’s name) be liquidated and a check issued to him/her so that he/she can deposit to a beneficiary IRA that he has established with a custodian?
Permalink Submitted by Alan Spross on Thu, 2010-12-02 21:05
It does not apply because a non spouse beneficiary IRA cannot be rolled over at all. Any changes of custodian must be done solely by direct trustee transfer, and there is no limit to the number of direct transfers.