CAN FUNDS FROM A DIVORCE JUDGEMENT QUALIFY AS RETURN OF FUNDS FOR A 60 DAY ROLLOVER?
Our client took $50,000 from her SEP IRA less than 60 calendar days ago. She is about to receive a trustee to trustee transfer of funds from her divorce judgement of $250,000. Can $50,000 of the incoming funds be used to meet the 60 day rollover rule?
Permalink Submitted by Alan - IRA critic on Tue, 2019-11-19 20:23
No, a transfer incident to divorce is not a distribution and is therefore not taxable, so 250k will be transferred into her IRA account. If she then took out 50k to complete the rollover of the other distribution, she would still be left with a 50k taxable distribution which could not be rolled over because of the one rollover limitation in a 12 month period. 60 day rollovers and direct transfers cannot be mixed or interchanged. If she has enough other money to roll over some part of the 50k distribution, that would reduce the taxes and the penalty if she is under 59.5. Otherwise, all she can do is use the 50k distribution she already took to delay having to take the next distribution from her IRA that receives the 250k non reportable transfer.