New rollover rules
20,000 was a rollover to a traditional IRA. Person then did another rollover of
7,500 to his Roth IRA. What will be taxed?
20,000 was a rollover to a traditional IRA. Person then did another rollover of
7,500 to his Roth IRA. What will be taxed?
Permalink Submitted by Jose Morales on Wed, 2015-07-01 16:13
Did the $20,000 originate from a traditional IRA or was it a direct rollover from an employer sponsored plan?
Permalink Submitted by Philip Cannato on Wed, 2015-07-01 16:46
The 20,000 was from an IRA.
Permalink Submitted by Jose Morales on Wed, 2015-07-01 18:30
Did the $7,500 rollover to the Roth originate from the traditional IRA ($20,000) or was this a separate Roth to Roth rollover?
Permalink Submitted by Philip Cannato on Thu, 2015-07-02 11:21
It was a separate Roth to Roth rollover.
Permalink Submitted by Jose Morales on Thu, 2015-07-02 16:22
The “new” rollover rules only allow one rollover for all IRAs in a 12 month period. If the Roth to Roth rollover was within 12 months of the IRA to IRA rollover then it was done in violation of the rollover rules.
Permalink Submitted by Alan - IRA critic on Wed, 2015-07-01 18:25
Assuming the rollover rules and deadlines were met, only the 7,500 conversion will be taxable. And if the person had basis in the IRA documented on Form 8606, a pro rated portion of the 7,500 representing the portion of basis will reduce the 7.500 taxable amount. You may be concerned with the one rollover limitation, but a Roth conversion does not count as a rollover for purposes of this rule.