Spousal Beneficiary ability to process a 60 day rollover
Client’s husband passed away and she was 100% primary beneficiary to his IRA. She in error, requested a one time distribution payable to her. Her intent was to transfer to her existing Traditional IRA but simply checked wrong box. I’m under the impression since she is a spousal beneficiary she can rollover funds minus 2018 RMD into her IRA. If she was a non spouse and received a one time distribution no rollover would be allowed. Am I correct on believing she can indeed rollover these proceeds? If so, where do I find proof? Her CPA is stating she can’t rollover the funds but I don’t know if he has full story.
Permalink Submitted by David Mertz on Wed, 2018-10-24 03:26
Yes, provided that it does not result in a violation of the one-rollover-per-12-months rule, except for the portion of the distribution that is an RMD she can roll over this distribution from the IRA owned by her husband to her own IRA (but not to an inherited IRA for her benefit). See #2 under “Inherited from spouse” on page 5 of IRS Pub 590-B.
Permalink Submitted by Alan - IRA critic on Wed, 2018-10-24 04:39
If the CPA is looking for the tax code citation, then Sec 408(d)(3)(C) addresses this issue. Basically, it states that inherited IRAs are NOT eligible for rollover, but an IRA inherited from a spouse is not treated as inherited for rollover purposes. So if decedent left his IRA 50% to a child and 50% to a spouse, the spouse could roll over her portion, but the child could not.