IRA rollover and calulation of the 1 year rule
Client plans a $10,000 distribution from IRA #1 in the form of receiving a check on December 26, 2015 and further plans to make a roll-over contribution in the same amount to IRA #2 on or before February 15, 2016 and accomplish a roll-over within 60 days (with no taxable consequences in 2015 or 2016 for this distribution).
What is the earliest date that a subsequent distribution from IRA #3 may be taken (with an intention to also make a 60 day roll-over contribution and not have any taxable consequences in 2016 or 2017 for this subsequent distribution)? ……December 26, 2016, December 27, 2016 ….. or February 15 or 16, 2017, or another date?
Permalink Submitted by Alan - IRA critic on Wed, 2015-12-23 19:47
The 12 months is measured from the date the first distribution is received. The first day to receive the next distribution to be rolled over would be 12/26/2016, but to avoid any confusion I would use 12/27/2016. Since the received date cannot always be well documented I would also allow a couple extra days to avoid any issues in proving the actual receipt date. Under the one rollover rule, the distribution can be split up into several rollover contributions and this is still just one rollover. But distributions on different days that are combined into one rollover contribution violate the rule because there were two distributions.
Permalink Submitted by Mark Atkinson on Wed, 2015-12-23 22:37
Thanks for that reply. The extra day seems to provide a bit of extra safety, however, please confirm that if the amount of the first distribution is “received’ as evidenced by a direct deposit ACH or Fed Funds wire entry on a certain date, say Monday December 28, 2015 (a full business and banking day), then the Subsequent Distribution can, technically, be received on Wednesday December 28, 2016 (also a full business and banking day) but not received on December 27, 2016, Again, with evidience of the direct entry via ACH or Fed Funds wire indicating that it was received on that December 28, 2016 date, the 1 year rule will have been satisfied. Thanks
Permalink Submitted by Alan - IRA critic on Wed, 2015-12-23 23:04
Yes, 12/28/2016 would be OK. The one year period starts on 12/28 and should therefore end on 12/27. 12/28/2016 would be the first day of the next 1 year period.