5 year rule on Roth IRA

Client is over 59.5. Roth was opened in 2000. If he withdraws 100% in 2009 and then converts additional funds in 2010, does the 5 year clock on taxable earnings start again since account was empty or are all distributions still tax?

Thank you in advance.



Following is a copy of the IRS Regs addressing the 5 year holding period for Roth distributions. It appears that since this client has already fulfilled the one time 5 consecutive year holding requirement and is over 59.5, his future Roth accounts will retain qualified status even with a gap containing no Roth assets. Note that the “consecutive years” requirement means that if someone drops their Roth PRIOR to attaining the 5 year period, they must start again from year 1.

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Q–2. When does the 5-taxable-year period described in A–1 of this section (relating to qualified distributions) begin and end?

A–2. The 5-taxable-year period described in A–1 of this section begins on the first day of the individual’s taxable year for which the first regular contribution is made to any Roth IRA of the individual or, if earlier, the first day of the individual’s taxable year in which the first conversion contribution is made to any Roth IRA of the individual. The 5-taxable-year period ends on the last day of the individual’s fifth consecutive taxable year beginning with the taxable year described in the preceding sentence. For example, if an individual whose taxable year is the calendar year makes a first-time regular Roth IRA contribution any time between January 1, 1998, and April 15, 1999, for 1998, the 5-taxable-year period begins on January 1, 1998. Thus, each Roth IRA owner has only one 5-taxable-year period described in A–1 of this section for all the Roth IRAs of which he or she is the owner. Further, because of the requirement of the 5-taxable-year period, no qualified distributions can occur before taxable years beginning in 2003. For purposes of this A–2, the amount of any contribution distributed as a corrective distribution under A–1(d) of this section is treated as if it was never contributed.

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