"Mark Freeland" <BnetOnewsX[at]sbcglobal.net> wrote:

- quote -

snip

I am not an authority on rollovers but I believe there is a
basic flaw in your reasoning. If I am not mistaken, you
must include any rollovers in transit in the IRA balance for
determining the RMD. Thus, you gain nothing by this maneuver
except for the hassles and possible fees.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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Mark Freeland wrote:

- quote -

Once you attain the age requiring RMDs, the law states that
you can not rollover your RMD. The law also states that your
account balance gets adjusted for any rollovers or
recharacterizations not in any account at 12/31.

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"Mark Freeland" <BnetOnewsX[at]sbcglobal.net> wrote:

- quote -

It is prohibited see IRS Reg 1.408-2

See Rev. Rul. 82-153"
Based on 1.408-2 of the regulations, the required
distributions from the account of a person who has had a
rollover into an IRA after attaining age 70 1/2 are computed
as follows. The initial distribution, for the year of the
rollover, must be at least equal to the lesser of: (1) the
balance in the account, or (2) the entire amount rolled
over, divided by the individual's life expectancy at age 70,
reduced by one for each taxable year commencing after the
individual's attainment of age 70 1/2. The same computation
method is followed in subsequent taxable years, except that
the numerator to be used after the year of the rollover is
the account balance (including any accumulations) in the
IRA, determined at the beginning of the taxable year, rather
than the "entire amount rolled over."

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Mark Freeland wrote:

- quote -

snip

- quote -

I thought about this after too much egg nog a few years ago.
From your referenced link
http://www.irs.gov/publications/p590/ch01.html#d0e3292

Figuring the Owner's Required Minimum Distribution
Outstanding rollovers and recharacterizations. The IRA
account balance is adjusted by outstanding rollovers and
recharacterizations of Roth IRA conversions that are not in
any account at the end of the preceding year.

This appears about 2/3 down, and is easily found by doing a
'find' within your browser for "figuring the owner"

Nice try, though.
JOE

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"Mark Freeland" <BnetOnewsX[at]sbcglobal.net> wrote:

- quote -

What's wrong is you missed the following in the publication
cited above. You are right in thinking that it should not be
possible to completely circumvent the RMD's using 60 day
rollovers:

Under the subject heading of "Figuring the Owner's Required
Minimum Distributrion, it states that you should "figure
your required minimum distribution for each year by dividing
the IRA account balance (defined next) as of the close of
business on December 31 of the preceding year by the
applicable ... life expectancy."

Then "IRA account balance" is defined as "The IRA account is
the amount in the IRA at the end of the year preceding the
year for which the required minimum distribution is being
figured.

Continuing as a subsection is one entitled "Outstanding
rollovers and recharacterizations" which states that "The
IRA account balance is adjusted by outstanding rollovers ...
that are not in any account at the end of the preceding
year." It continues, "For a rollover from a qualified plan
or another IRA that was not in any account at the end of the
preceding year, increase the account balance of the
receiving IRA by the rollover amount valued as of the date
of receipt."

That requirement forces you to have to take a RMD even
though you had no official IRA balance as of December 31st.

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Mark Freeland wrote:

- quote -

Ummm. It's tax fraud?

You cannot roll over a RMD which is what you would be
attempting to do every year after age 70.5

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Mark Freeland wrote:

- quote -

Apparently you missed that small part of Pub 590 which
INCLUDES any outstanding (not in any account) rollovers as
being ADDED to the IRA account balance as of 12/31/xx.
Sorry, nice try.

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The following seems to be a way to use 60 day rollovers to
completely circumvent RMDs. I don't think this should be
possible, so please help me identify the flaw:

Year 1 (age 69.5): Withdraw full IRA Dec 1. Form 5498 will
show zero IRA balance as of Dec. 31. Keep money in bank,
earning (taxable) interest.

Year 2: Rollover IRA into new IRA account Jan 2 (w/i 60
days). No RMD (based on zero IRA balance last Dec 31st).
Withdraw full IRA on Dec 2. This seems to satisfy the 1 year
waiting period:

"The 1-year period begins on the date you receive the IRA
distribution, not on the date you roll it over into an
IRA".
http://www.irs.gov/publications/p590/ch01.html#d0e3292

Year 3: Rollover IRA into new IRA account Jan 2 (w/i 60
days). No RMD. Withdraw full IRA on Dec 3.

....

Year 30: Rollover IRA into new IRA account Jan 2. (w/i 60
days). No RMD. Withdraw full IRA on Dec 30th.

By this time, you are 100 years old. This can work up to
age 130 if you begin withdrawals the first year on Nov 3 :-)

What's wrong with this picture?

Thanks,
Mark Freeland
BnetOnewsX[at]sbcglobal.net

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >