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February 16, 2009

Rollover Contribution

Your Guide

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Definition

The redeposit of amounts that were distributed from a retirement account, to an eligible retirement plan.

  • A rollover contribution can be part of a direct rollover or an indirect-rollover.  The rollover portion of an indirect rollover must generally be completed within 60-days of the participant receiving the distributed property/assets.
  • Rollovers of eligible amounts that are completed  within the 60-day period are reportable, but not taxable.
  • Generally, rollover contributions must be made with the same property that was distributed from the retirement account. Exceptions apply to distribution of securities from a qualified plan, where the participant may sell those securities and rollover the cash proceeds. Under this exception, to rollover an eligible rollover distribution of property, the participant must either rollover the actual property distributed or sell it and rollover the proceeds. The participant cannot keep the distributed property and rollover cash or other property.
  • Rollovers between IRAs are limited to one rollover per 12-month period f

Referring Cite

IRC § 402(c)(3), IRC § 408(d)(3), Treas. Reg. § 1.401(a)(31)-1,

Additional Helpful Information

  • Exceptions to the 60-day rollover rule:
    • In cases where a distribution from an IRA is intended to be used for first-time home-buyer purposes, the 60-day period is extended to 120-days, providing  the rollover is being made because the transaction did not occur  by reason of a delay or cancellation of the purchase or construction of the residence
    • Section 644 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), added a new provision to the tax Code to permit the Secretary to waive the 60-day rollover requirement “where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement.”
  • The same property that was distributed from an IRA must be rolled over. An individual who distributed cash and rollover property was treated as not completing a property rollover—resulting in the amount being taxable [ 110 T.C. No. 11  Lemishow vs Commissioner ]

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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