Technically, he cannot roll over this portion as Al indicated. There is also no technically correct work around for this.

The fact that IRA RMDs can be aggregated between accounts and transfers between accounts can be done without being considered distributions, does not prevent the timing rules for distributions actually taken from applying. The first distribution from any IRA includes the RMD for the year, and it is not rollover eligible.

The correction for doing a rollover of these funds would work as follows and may actually be acceptable to client:
1) 08 RMD taken and rolled back as an excess contribution within 60 days
2) QCD transferred
3) Excess contribution NOT corrected and defaults to the 6% excise tax as of 12/31/08 on the amount of the excess.
4) 2009 RMD is then applied to correct the prior excess on Form 5329. You could include the 2009 QCD to do this. But what if Congress ends up excusing the 2009 RMD. You would then have to take a taxable distribution anyway to eliminate another 6% charge for 2009.

Bottom line is that Congress is making effective tax planning nearly impossible by their 4th quarter tax legislation every year. Then, as in the Bailout bill that continued the QCD, they make no provision for rolling back any prior RMD amounts. Procrastinators end up better off than taxpayers who had a plan that failed to factor in late Congressional action or bailouts, and charities lose out on contributions.

I guess the only answer is to keep options open for as long as possible. Perhaps mid December is the best date to deal with the RMD for the entire year if taxpayer does not need the RMD cash flow.

For the record, here is Ed’s article on this:
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081019/REG/31…

• Flag as spam
• Log in to Reply