At a glance
- The same-property rule is the third rollover restriction, alongside the 60-day deadline and the once-per-year rule, and Slott notes it comes into play much less often than the other two.
- Cash received must be rolled back as cash, and shares received must be rolled back as those same shares rather than a different holding of equivalent value.
- In Slott's illustration, Ella holds 1,000 shares of Choosin' Texas Company stock valued at $150,000, or $150 a share, inside an IRA.
A client who redelivers a different asset than the one distributed from an IRA can void a 60-day rollover, Ed Slott wrote in an IRAHelp column. The same-property rule is the third rollover restriction, alongside the 60-day deadline and the once-per-year rule, and Slott notes it comes into play much less often than the other two.
Cash received must be rolled back as cash, and shares received must be rolled back as those same shares rather than a different holding of equivalent value. The test is identity of the property, not equality of the amount.
In Slott's illustration, Ella holds 1,000 shares of Choosin' Texas Company stock valued at $150,000, or $150 a share, inside an IRA. She has the shares distributed in kind to a non-qualified brokerage account so she can roll them into an IRA at another custodian within 60 days, but by the time she does the rollover the price has dropped to $100 a share. She must still deliver the same 1,000 shares, worth $100,000 by then, to stay inside the rule.
An exception for plan money
Property arriving from a retirement plan gets more room. The client can either roll the same property into the IRA or sell it and roll over the proceeds, but there must be an actual sale; keeping the property and rolling over cash instead does not work.
If the same-property rule is violated, the distribution is no longer eligible for rollover, so it becomes taxable and possibly subject to the 10% early-distribution penalty. The invalid rollover is then treated as an excess contribution carrying a 6% annual penalty until timely corrected, and Slott writes that the IRS has no authority to excuse a same-property violation.
Slott's stated remedy is blunt: don't do 60-day rollovers. The extract of the column ends there, so the alternative he recommends is not spelled out in the available text.
At the desk, the exposure sits in the in-kind move, where the paperwork looks like a transfer of dollars and the rule is about the shares themselves. A client who takes stock out of an IRA to move it between custodians and then funds the receiving account with cash, or with a different holding bought to match the old value, has broken the rule even when the balance matches to the penny.
Reported by the Tax & estate planning desk from Ed Slott — IRAHelp. Published . Corrections