Hi Everyone,

I have a customer who converted a Traditional IRA into a ROTH IRA and then immediately withdrew money from the ROTH Conversion.

Within 60 days of the withdrawal these monies were successfully rolled back into the ROTH IRA.

Will the successful rollover back into the ROTH waive the application of the 10% penalty on the withdrawal of converted funds within the 5 year non-exclusion period OR does just the fact that the money was accessed during the 5 year period for this conversion cause the 10% penaly to be applied despite the successful rollover back into the ROTH?

Customer does not meet any other penalty exclusion cricumstances.

Am I confused? Must be the heat.

Thanks,

Dave H.

I don't think there will be a penalty. I think you have 2 situations. First there is the conversion - I am assuming it was done correctly and that the client was eligible for it. Then you have a distribution from a Roth IRA which was timely rolled over (within 60 days) so no tax no penalty. No more distributions from that Roth can be rolled over for 12 months.