Roth IRA “Qualified Distributions”
Hello,
I have a client who is 72. We established a Roth IRA for this client over 5 years ago. I am in the process of converting a portion of his Traditional IRA. However, his accountant has warned that the converted amount will be subject to a new 5 year holding requirement. I told him that this was simply for the earnings in the account – not the principal (amount that was converted.)
Is this correct?
Thanks in advance for any input you provide.
Permalink Submitted by tomd37 on Tue, 2010-11-30 19:20
My understanding is that because the client is over 59.5 and has a Roth IRA already established for more than five years, the new five year holding is not applicable including any earnings. Sounds to me, if I am correct, the client needs a CPA who is more aware of the Roth rules. Let’s see what others have to say.
Tom D.
Permalink Submitted by Alan Spross on Tue, 2010-11-30 20:51
Tom is correct. Client no longer has to be concerned with any of the usual holding periods.
However, if he does a 2010 conversion and distributes any funds from that conversion prior to 2012, income deferred from the 2010 conversion is accelerated into the year of the distribution. The amount of any such distribution is generated on the re designed 8606 for 2010 or 2011. If he has prior year regular contributions, those can be distributed before conversions. And 2012 is only 13 months away.