IRA ROLLOVER STRADDLE

[Lee B]

New client age 75, whose spouse died last summer.

Client received a taxable $154,000 IRA distribution  check just before Christmas.

She turned around and wrote a check on January 16th depositing the $154,000 into a different IRA, constituting a rollover.

Investment Advisor says she isn't required to include the $ 154,000 her RMD calculations for 2018 , since the money was in her personal bank account on 12/31/17 ???

Does this mean you can legitimately do this at the end of every year and avoid most of the RMD ???

 

[Gail in Virginia]

I guess the advisor is thinking that the amount was not part of the balance of the IRA at 12/31/17 and therefore will not be included in the calculation because it isn't in the 5498 amount.  But I thought the reason 5498's were not issued until May or June was so they could include contributions made in the first 3 1/2 months of the year for the previous year, and I would think that would include rollover amounts. 

But I am just speculating and thinking out loud.  I don't think it is legitimate, but you might get away with it.  Like so many other things....

 

[jklcpa]

The investment advisor is wrong. The RMD is calculated based on the December 31st balance of the immediate preceding year, and that is adjusted to include any outstanding rollovers or recharacterized Roth IRA conversions that were not in any traditional IRA  during the year.  That information is taken from directly from each of the worksheets provided by the IRS to calculate RMDs.

[Lee B]

Judy,  thanks for pointing me in the right direction. Much appreciated.

 

[jklcpa]

Sure, no problem.  If you want the cite, I looked it up. It is sec 408(a)(6) that says the calculation follows the same rules as in 401(a)(9) that covers qualified plans.