Life and Death Planning for Retirement Benefits

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142 Life and Death Planning for Retirement Benefits
E. Taxpayer cannot later choose which rollover is tax-free.
Yoav Example: In July, Yoav withdraws $60,000 from IRA #1, intending to roll it over tax-free
to another IRA. Then he remembers that in April of the same year he received, and rolled over to
IRA #2, a $1,000 distribution from IRA #1. He would rather pay tax on the $1,000 distribution he
received in April than on the $60,000 distribution he received in July. He now wishes that he had
said the $1,000 contribution to IRA #2 in April was part of his “regular” IRA contribution for the
year, not a rollover of the distribution from IRA #1. Unfortunately, he can not now retroactively
elect to treat the $1,000 he deposited in IRA #2 in April as a regular rather than a rollover
contribution. In order for a contribution to qualify as a tax-free rollover the participant must elect,
“at the time the contribution is made, to treat the contribution as a rollover contribution. ...This
election is irrevocable.” Reg. A-13. Thus, when Yoav made his $1,000 contribution
to IRA B in April he was required to irrevocably designate it either as a rollover or a regular
contribution. If he said it was a rollover contribution when he made it, he cannot retroactively
change that election.
2.6.06 60-day rollover deadline; exceptions and blanket waivers
A rollover generally must be completed no later than “the 60th day following the day on
which the distributee received the property distributed.” See also
regarding how this period is measured.
Unlike the due date for tax returns, the 60-day deadline is apparently not eligible for the
automatic extension of time (under § 7503) to the next business day if the 60th day falls on a
weekend or holiday. The IRS has granted hardship waivers of the deadline in several
cases where the deadline fell on a weekend or other “bank holiday.” See PLRs 2006-06055, 2009-
30052, 2009-51044, 2009-52066, and 2010-39041.
The deadline is 60 days, not two months. A distribution made on March 12th must be rolled
over by May 11th; May 12th is too late. PLR 2005-23032.
There are several exceptions to the 60-day deadline. The most significant one is that an
individual may seek a “hardship waiver” of the deadline; see Here are other less
commonly seen exceptions:
A. First-time homebuyer. There is a 120-day deadline rather than a 60-day deadline for the
rollover of a “first-time homebuyer” distribution if the distribution is not used to
purchase the residence “solely by reason of a delay or cancellation of the purchase or
construction of the residence.” The recontribution of the thwarted homebuyer distribution
is also not treated as a rollover for purposes of the once-per-12-months rule
PLR 2004-23033.
B. Disaster-based extensions. The IRS tends to grant blanket extensions for this and other
tax deadlines in the case of certain federally-recognized disasters. See the IRS
pronouncement applicable to the disaster in question (e.g., IRS News Release IR-2004-115
extending deadlines for taxpayers affect by Hurricane Frances).
C. Qualified reservist distribution. A qualified reservist distribution (QRD; may
be “rolled into” (i.e., contributed to) an IRA or Roth IRA at any time during the two-year