IRA Trustee-to-IRA Trustee transfers??? | Ed Slott and Company, LLC

IRA Trustee-to-IRA Trustee transfers???

For the following: IRA account at (Legacy) Treasury Direct, bank (with whom there is IRA agreement) is custodian, (cash) Payments (interest on Treasuries) all go by direct deposit to IRA account at brokerage. Seems to me: I reckon that these (cash) Payments are all IRA Trustee-to-IRA Trustee transfers, 'automatically'. Questions: True? And if true, do you know of documentation for it? Thank you.

I have pasted below from the Treasury Direct website some details regarding select bank IRA custodian interface with Treasury Direct. While this does not directly deal with the deposit of interest payments, I would assume that the bank is using a clearing firm such as DTC to handle the interest deposits to the IRA, just like the dividends or interest in any Security would be posted to the account holding the security. Interest payments would not be considered a contribution to the IRA, and IRA assets themselves are not being tranferred or rolled over. >>>>>>>>>>> Savings bonds and your IRA One of our readers shared the following reply received from the Treasury Department Customer Service in response to a question about I Bonds and IRA accounts: "Please note that currently the regulations do not allow for a TreasuryDirect account to be established for an IRA nor do they allow for electronic bonds to be owned by an IRA. If you have an IRA agreement (either Roth or regular IRA) with an organization, such as a bank or investment company, that is willing to be designated as trustee or custodian for the IRA in the registration of savings bonds, then it may be possible to have paper Series I bonds and /or Series EE bonds purchased for the IRA. The registration of the savings bonds would need to include the name of the trustee or custodian for the IRA, the name of the owner of the IRA, and the date of the IRA agreement. For example: First National Bank Trustee U/A John Smith IRA dated 2/12/98 The form PD F 5374-1 is used to purchase Series I bonds in an IRA registration, while form PD F 5263-1 is used to purchase Series EE bonds in an IRA registration. Both forms can be ordered from the Treasury Department: automated forms The trustee/custodian for the IRA would complete the appropriate form and send the form and a check or money order for the purchase price of the bond(s) to a servicing Federal Reserve Bank that handles savings bonds. You can find the address for the Federal Reserve Bank for your area at the government's website. Please note savings bonds issued in an IRA registration must usually be mailed to the organization that is serving as trustee/custodian of the IRA. The bonds are usually delivered within 3 weeks of the date the order is received by a servicing Federal Reserve Bank. As our office doesn't have jurisdiction over IRA's or tax matters, we suggest that you contact the IRS or a tax advisor before purchasing savings bonds for an IRA. This office does not maintain a listing of financial institutions that are willing to be designated as trustee or custodian of savings bonds registered an IRA. You can not purchase electronic bonds for an IRA because at the present time you can not purchase bonds in a fiduciary registration through TreasuryDirect. I trust this information will be of assistance." Pamela, Customer Service Specialist >>>>>>> >>>>>>>>> >>>>>>>>>

Thank you,, for your reply. But I could not follow its relevance to the situation I sought to describe: there are two IRAs with two different custodians -- (1) bank/TreasuryDirect and (2) a brokerage firm. The cash interest payments originate at the former IRA, and wind up at the latter IRA.

Sorry, I thought by "brokerage" you meant the bank. I guess you main concern is the 12 month rollover limitation? I don't know how or if the interest bypasses the bank IRA that holds the bonds, but perhaps the bank should be contacted first to see how and why it was setup this way. Is the brokerage bank affiliated? The main issue here is that you don't want a 1099R being issued that would have to be reported on the 1040 as a rollover, since that would require further explanation. Since the funds are not being made out to the IRA holder, they actually are direct transfers, so this should not be a problem, but it would be nice to understand how or why this is happening. These Treasury Direct IRA arrangements I believe are quite recent, and perhaps this all has to do with the fact that paper Certs are required for the bonds, while the interest can perhaps be handled electronically. Anyway, I don't really know, but the bank should be able to explain it as they are operating in somewhat the same specialized capacity as a self directed (real estate) IRA custodian would using specialized procedures.

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