60 day rollover for IRA and Roth IRA
Client took money out of his IRA about 20 days ago to purchase real estate. He’s now trying to refinance the property and put the IRA money back. There’s a chance the refi isn’t done within the 60 day window. Can he do a 60 day rollover with his roth IRA to replenish the IRA, then use the refi proceeds to replenish the Roth?
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-19 16:26
No. The one rollover rule applies to all of his IRA accounts including Roths. If he withdrew from the Roth, he could use the money to complete the TIRA rollover and that would reduce the tax and penalty since the Roth distribution which cannot be rolled back would probably be non taxable. Or he could split the difference and use Roth money to roll half the TIRA distribution back, and eliminate half the tax bill. Note that if this qualifies as a first home, there is also a 10,000 lifetime penalty exception should he not want to tap the Roth.
Permalink Submitted by David Mertz on Mon, 2021-04-26 15:11
Since Roth conversions are disregarded with respect to the rollover limitation, he could take a distribution form the Roth IRA to complete a Roth conversion of the traditional IRA distribution, then use the refi proceeds to roll over the Roth IRA distribution. That would leave the client with the income tax liability for the traditional IRA distribution but get the money into a Roth IRA for tax-free growth instead of just incurring the tax liability by not rolling over the traditional IRA distribution. Even if the refi funds did not become available to complete the rollover of the Roth IRA distribution, the result would generally be no worse than just keeping the traditional IRA distribution except that no IRA distribution made in the one-year period following the date of the Roth IRA distribution would be able to be rolled over.