Advice on “Same Property Rule”
I’m in the midst of a household emergency, and decided my best course of action was to take an early distribution from my Roth IRA, and pay it back into the account in a few weeks when my paycheck arrives under the 60-day-rollover rule.
I logged in to my account, placed an order to sell $23,000 worth of shares, then got the screen telling me the funds would be deposited in 3 days (along with a notice that this would be considered an early distribution).
Now, what my CPA failed to warn me about was the “Same Property Rule,” which I don’t quite understand.
Given my example, do I need to buy $23,000 shares of the same mutual fund when I re-deposit into my Roth IRA?
Or, do I simply deposit the cash that was delivered to my account into the Roth?
Or, simply by virtue of logging a “sell” order, did I create a taxable event for myself? (in which case I’ll call them ASAP and try to cancel the order!)
Another question on the same note: if I’m able to complete the 60-day-rollover into the same account, will my financial institution give me a 1099 with the ROLLOVER code on it upon request? Or is that something I simply add on my own when I file my taxes next year?
Thanks in advance!
Permalink Submitted by Alan - IRA critic on Fri, 2021-05-14 15:19
The “same property” requirement only applies to actual “in kind” distributions from the IRA where you receive securities instead of cash. In your case, you sold within the Roth and the custodian distributed cash, so this rule does not apply here. When you complete the rollover, you just deposit a check to your IRA and tell the custodian it is a rollover contribution. You can then purchase whatever holdings you wish in the Roth.
However, you can only do this rollover if you have not rolled over another distribution taken in the last 12 months. Hopefully, you did not do a prior such rollover, or you cannot roll this distribution back.
You will get a 1099R reporting this distribution that will not reflect that you rolled it back. You report the rollover on line 4a and 4b of Form 1040, and enter “rollover” on the line next to 4b.