IRA rollover ok in light of SEPP?

[billfgrady]

IRA beneficiary (age 58) is taking substantially equal periodic payments. Is it possible for the beneficiary to request a non-trusteed rollover of some of the funds in his account without affecting the tax benefits of the SEPP? In other words, IRA beneficiary wants to structure this as a short-term loan, where he will roll the funds back into the IRA within the 60-day time limit. Is there an argument that, provided he gets the money back into the same or another IRA within 60 days, this isn't a "distribution" and that the SEPP isn't affected?

[saabraa]

Smells like a distribution to me, negating the SEPP.

[Appleby]

Bill,

I am a little confused: Are the assets in a beneficiary/inherited IRA? If so, then a SEPP is not applicable or required for those assets…as the distributions are free from the 10 percent excise tax because they are “death distributions”.

If the beneficiary is the surviving spouse of the decedent and had elected to treat the assets as his/her ‘own’ then I am with saabraa…although others who are experts in the field have disagreed with that opinion. See Revenue Ruling 2002-62 http://www.irs.gov/pub/irs-drop/rr-02-62.pdf

[billfgrady]

Appleby:

It is the latter. Thanks for the cite to the Rev. Rul.

Bill

[billfgrady]

Thanks to all who responded. Rev. Rul. 2002-62 is pretty clear that: "substantially equal periodic payments are calculated with respect to an account balance as of the first valuation date selected in paragraph (d) above. Thus, a modification to the series of payments will occur if, after such date, there is (i) any addition to the account balance other than gains or losses, (ii) any nontaxable transfer of a portion of the account balance to another retirement plan, or (iii) a rollover by the taxpayer of the amount received resulting in such amount not being taxable." I read (ii) and (iii) to mean that a trustee-to-trustee transfer OR a non-taxable rollover would cause a modification of the SEPP and negate it.

[Appleby]

I am with ya. That is my point of view as well- but see the article at http://www.72t.net/ArticleShow.aspx?WA=41 .

Not that I believe everything I read, but I usually defer to Bill on 72(t) issues and he is one of the leading experts on the topic.

If link above does not work, try this one.

http://www.72t.net/Articles/ArticleShow.aspx?WA=41

Edited t6o add new link