60 Day Rollover For Both Spouses
Hi Alan,
I have two clients, husband and wife, who are both under age 59.5. They are receiving a large payment in August, but are short on cash until then. They both have IRAs, and were wondering the following… Husband takes $100,000 out of his IRA in May, and replenishes it within the 60 day window. The proceeds to replenish his IRA would come from the wife’s IRA, but she would replenish hers within a new 60 day window with the large payment they are to receive in August. Effectively, this doubles the time they can have the money. There would be a loose paper trail, but none linking the two 60 day rollovers directly. My thoughts were that it would just look like two separate allowable transactions, but I thought I would check first. Thanks again for your help!
Thanks!
Josh
Permalink Submitted by Alan - IRA critic on Sat, 2017-03-25 17:45
While the more restrictive one rollover limitation was adopted to shut down various extended rollover-loan schemes, this client can still do this because the restriction applies per taxpayer so each spouse is allowed to do the one rollover per 12 month period. But this plan is still risky because any delay in the receipt of the August payment will cause a very large distribution to be taxable and subject to penalty. The plan is even more risky if the August payment is coming from a real estate transaction since those are notorious for delays and pitfalls. If they proceed the margin of error can be increased for any period of time the initial May distribution can be delayed. A 60 day rollover period is measured from the date the distribution is received to the date of receipt of the rollover contribution by the custodian.