Taxation in What Year?

Submitted by Jay Pinto on Wed, 2018-12-12 20:48

Client (age 75) was divorced in Nov 2018 and is receiving $200,000 of a rollover of her ex-husband’s IRA. She will need $20,000 for household expenses and plans to rollover $180,000 within 60 days to her IRA. If the rollover check is received by her prior to year-end 2018, but the $180,000 is not rolled to her IRA until Jan 2019, it seems logical that the $20,000 will be taxable in 2018 and if the rollover check is received in early January 2019, the $20,000 would be taxable in 2019. Correct?
Assuming she already owns an IRA and must take a 2018 RMD for that IRA, if the rollover is received before year-end, I do not believe this $20,000 would be considered an RMD to go toward satisfying the 2018 RMD on her existing IRA. Correct?
Thank you.



Submitted by David Mertz on Wed, 2018-12-12 21:22

  • A transfer of an IRA incident to divorce is only permitted by trustee-to-trustee transfer.  It cannot be done by distribution from the ex-husband’s IRA and rollover to the client’s IRA.  The entire $200,000 must be moved by nonreportable trustee-to-trustee transfer to an IRA of the client, then the client can take a taxable distribution from the IRA of any amount the client desires.
  • The ex-husband’s and client’s RMDs for the year in which the transfer takes place are unaffected by the transfer.


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