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Multiple distributions w/i 60 days, but 1 IRA rollover


BonoConsilio

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Can multiple distributions from an IRA within a 60 day period be rolled over as 1 amount in compliance with the 60 day rollover rule. For example.

Day 1 - $4,000 distribution (no taxes w/h) f/ IRA 1

Day 40 - $5,000 distribution (no taxes w/h) f/ IRA 1

Day 40 - $500 distribution (no taxes w/h) f/ IRA 1

Day 55 - $9,500 rolled over back to IRA 1.

Does this comply with the 60 day rollover rule?

Example 2:

Day 1 - $60,000 distribution (no taxes w/h) f/ 401k #1

Day 35 - $42.35 distribution (residual income) (no taxes w/h) f/ 401k #1

Day 55 - $60,042.35 rolled over to IRA #2

Does this comply with the 60 day rollover rule?

If example 2 complies, but example 1 doesn't, why?

In example 1, what is the maximum amount eligible for the 60 day rule?: $9,500; $5,500; or $5,000?

I would argue that regardless of the number of distributions within a 60 day period, the total amount eligible as 1 amount rolled over is the total amount distributed within the 60 day period as one continuous amount distributed over multiple days. Neither 26 USC 408, nor regulations under CFR 1.408 limit or define the number of distributions for 1 rollover.

Example 3: same facts as example 1 except IRA owner rolls over $9,500 to IRA #2 at a different institution.

Same result?

Other opinions?

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Allow me a moment to editorialize.

It is because individuals continue to try and manipulate the intent of tax-favor laws, that the rest of us have to deal with the expense associated with dealing with pages and pages of regulations.

While many of us are out here fighting and trying to make arguments for fewer burdensome and costly regulations, examples like this remind us why regulators continued to feel empowered to do more.

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In Bobrow vs Commissioner, the Tax Court ruled against the taxpayer that was using a "bridge" strategy (i.e...using IRA funds for other circumstances) even though the strategy was found in IRS Pub 590 at the time.

I think if you asked Mr and Mrs Bobrow this question, their wallets would answer the question for you as to how wise following such a strategy would be even if you don't think you can find letter-of-the-law reference that disallows it.

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  • 3 months later...
On 12/31/2015 at 6:12 PM, hr for me said:

You need to read:

irs.gov/Retirement-Plans/IRS-One-Rollover-Per-Year-Rule and see how it applies to your examples.

Basically it sounds like loophole #1 has been corrected by the IRS to keep people from taking multiple short term loans against their IRAs

Oh, yes you are right, they have changed it, damn.

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