IRS Issues IRA Rollover Warning

A new ruling from the IRS could mean big changes for client retirement assets.

Get access to this article and thousands more...

All Financial Planning articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.

Already Registered?

Comments (4)
It appears that Elisa did not make a rollover for her distribution of $65.064, meaning that they should be aware that that portion would be taxable. This would be the same net effect if Alvan just took his distibutions from April 14th and not bothered with the rollovers and other distributions, unless Elsa is over 59 1/2 and Alvan is not. In that case, just take the money out of Elisa's IRA to begin with.

I do have a question. If Alvan's first distribution was made as a single distribution on April 14th, the second distribution on June 6th was taken from Elisa's IRA to be rolled to Alvan's IRA from their checking account, and the third distribution was taken from Alvan's IRA on July 31st to be rolled to Elisa's IRA from their checking account, would there not have been an issue with an ineligible rollover? Albeit, they are still stuck with a distribution of $65,064, which brings me back to the first part of my comment.
Posted by Gina A | Friday, April 11 2014 at 9:59AM ET
It appears that Elisa did not make a rollover for her distribution of $65.064, meaning that they should be aware that that portion would be taxable. This would be the same net effect if Alvan just took his distibutions from April 14th and not bothered with the rollovers and other distributions, unless Elsa is over 59 1/2 and Alvan is not. In that case, just take the money out of Elisa's IRA to begin with.

I do have a question. If Alvan's first distribution was made as a single distribution on April 14th, the second distribution on June 6th was taken from Elisa's IRA to be rolled to Alvan's IRA from their checking account, and the third distribution was taken from Alvan's IRA on July 31st to be rolled to Elisa's IRA from their checking account, would there not have been an issue with an ineligible rollover? Albeit, they are still stuck with a distribution of $65,064, which brings me back to the first part of my comment.
Posted by Gina A | Friday, April 11 2014 at 9:59AM ET
Ed,

In your opinion, would the IRS look differently at the practice of doing more than one rollover within 365 days - via check, not a direct institution-to-institution transfer - if the taxpayer had never cashed the check - simply held the check for less than 60 days and rolled it into their other IRA?

This could easily happen when consolidating accounts for the purpose of simplification or hiring a new adviser.

It would seem obvious that no benefit of receiving the distribution was gained by the taxpayer in this circumstance and the IRS would look the other way.

However, the IRS position with this new ruling may now be that the taxpayer must "prove their innocence" by showing they never benefited from the check-based distributions - and I wonder if the above circumstance would work for a taxpayer?
Posted by JASON T | Friday, April 11 2014 at 10:21AM ET
According to your "updated Friday, April ll, 2014 as of 10: 10 PM ET Financial Planning issue the disclosed restrictions DO NOT APPLY to direct (also called trustee-to-trustee) transfers).

Posted by Lawrence B] Thursday, June l9, 2014
Posted by LAWRENCE J B | Thursday, June 19 2014 at 9:19PM ET
Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

Already a subscriber? Log in here