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February 16, 2009

Outstanding Rollover

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Definition

Distributions taken from an IRA during one year and rolled-over to the same or another IRA during the following year.  For instance, a distribution taken in December of one year, and rolled over in January or February of the following year.

These rollovers are required to be completed within 60-days of receipt.

Referring Cite

IRC § 402(c)(3) , § 408(d)(3),  Treas. Reg. §1.402(c)-2, Q&A-11

 

Additional Helpful Information

 

An outstanding rollover is required to be added to the previous year-end fair market value (FMV) of the receiving IRA when calculating the required minimum distribution (RMD) for the year. For instance, if a distribution is taken in 2009 and rolled over in 2010, it must be added back to the 12/31/2009 FMV when calculating the RMD for 2010. Failure to add the outstanding rollover to the FMV will result in the calculated RMD amount being less than what it should be, causing the IRA owner to owe the IRS an excess accumulation penalty of 50% of the RMD shortfall.

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