Roth IRAs

• § 6.01 Overview of Taxation of Participants in Roth IRAs
• —–[1] Nontaxable Qualified Distributions
• —–[2] Taxable Nonqualified Distributions
• —–[3] Transfers from Traditional IRAs and Certain Other Plans
• —–[4] TQR Contributions by Beneficiaries
• —–[5] Nontaxable Transfers between Roth IRAs
• —–[6] Nontaxable Rollovers of Certain Military Death Payments
• —–[7] Surviving Spouse Election to Become Owner
• —–[8] Transfers Incident to Divorce or Legal Separation
• —–[9] Income Tax Withholding

• § 6.02 Contributions to a Roth IRA
• —–[1] Types of Contributions to Fund a Roth IRA
• —–[2] Roth Conversions
• ———-[a] Taxation of Roth Conversions
• —————[i] Taxation of Roth Conversions Generally
• —————[ii] Passing a Roth Convesion from a Qualified Plan through IRAs
• —————[iii] Relative Timing of an IRA Roth Conversion and Qualified Plan Rollover
• —————[iv] Roth Conversion from Qualified Plan with Personal Retention of Investment
• —————[v] Tracing Funds from a Qualified Plan through an IRA to a Roth IRA
• —————[vi] Special Treatment of Distributions of Employee Contributions
• —————[vii] Multiple Rollovers from a Single Distribution by a Qualified Plan
• —————[viii] Applicability of Substance-Over-Form Doctrines to Roth Conversions
• ——————–[A] The Substance-Over-Form Doctrine
• ——————–[B] Step Transactions Not Applicable to Roth Conversions Using IRA as Conduit
• ——————–[C] Combining Direct and Indirect Roth Conversions
• ——————–[D] Roth Conversions in Different Tax Years
• ——————–[E] Lack of Intent to Complete Non-Simultaneous Steps
• ——————–[F] Step Transactions and the Passage of Time
• —————[ix] Income Tax Withholding and Penalty for Premature Distribution
• ———-[b] Eligibility to Make Roth Conversions
• ———-[c] Methods for Making Roth Conversions
• —————[i] Choice of Roth Conversion Methods
• —————[ii] Requirements for an Indirect Rollover
• ———-[d] Recharacterization of Roth Conversions
• —————[i] Recharacterizations of Pre-2018 Roth Contributions and Roth Conversions
• ——————–[A] Recharacterizations of Pre-2018 Roth Conversions Generally
• ——————–[B] Recharacterization of a Failed Roth Conversion Still Available
• ——————–[C] Recharacterizations of Regular Contributions to IRAs Still Available
• —————[ii] Grant of Additional Time for Recharacterization
• ——————–[A] Requirements for Grant of Additional Time for Recharacterization
• ——————–[B] Failure to Recharacterize Not Discovered
• ——————–[C] Intervening Events beyond Taxpayer’s Control
• ——————–[D] Unaware of Need for Recharacterization Despite Reasonable Diligence
• ——————–[E] Reliance on Qualified Tax Professional
• —————[iii] Denial of Additional Time for Recharacterization
• ———-[e] Roth Conversions by Surviving Spouses and Other Beneficiaries
• ———-[f] Failure to meet Roth Conversion Conditions and Potential Mitigation
• —————[i] Must Meet Conditions for a Roth Conversion for the Year of Distribution
• —————[ii] Eliminating Excess Contributions by Making Corrective Distributions
• —————[iii] Eliminating Excess Contributions by Making Ordinary Distributions
• —————[iv] Eliminating an Excess Contribution by Absorption
• —————[v] Eliminating Excess Contributions by Recharacterization
• —–[3] Rollovers from Designated Roth Accounts
• —–[4] Rollover Contributions Between Roth IRAs
• ———-[a] Choice of Indirect Rollover or Trustee-to-Trustee Transfer
• ———-[b] Requirements for an Indirect Rollover
• ———-[c] Only One Rollover per Year
• ———-[d] Rollover Available to Beneficiary Who is Surviving Spouse
• —–[5] Nontaxable Rollovers of Certain Military Death Payments
• —–[6] After-Tax Contributions from a Qualifying Military Reservist

• § 6.03 Tax-Free Qualified Distributions from Roth IRAs
• —–[1] Qualified Distribution Defined
• —–[2] Excess Contributions
• —–[3] No Carryover of Five-Year Period from a Designated Roth Account

• § 6.04 Taxation of Nonqualified Distributions from Roth IRAs
• —–[1] Nonqualified Distributions in General
• —–[2] Classification and Taxation of Components of Nonqualified Distributions
• —–[3] The Ten Percent Penalty on Early Distributions
• ———-[a] Exceptions to the Penalty Common to IRAs and Roth IRAs
• ———-[b] Special Exception for Previously Taxed Components
• —–[4] Examples Illustrating the Taxation of Nonqualified Distributions

• § 6.05 Illustrations of Long-Term Tax Savings Afforded by Roth IRAs
• —–[1] Long-Term Tax Savings Due to Tax Rate Differential
• —–[2] Long-Term Tax Savings Due to Transfer of High Income Assets
• —–[3] Transfers to Roth IRAs When Funds Not Needed in Retirement
• —–[4] Retention of Funds in Both Traditional IRAs and Roth IRAs
• —–[5] Potential Collateral Benefits of TQR Contributions

• § 6.06 Transfers of Roth IRAs Incident to Divorce or Legal Separation

• § 6.07 Surviving Spouse’s Election to Become the Owner of a Roth IRA

• § 6.08 Inherited Roth IRAs

• § 6.09 Personal Borrowing While Maintaining a Roth IRA

• § 6.10 Retiree’s Payment of Roth IRA Expenses

• § 6.11 Tax-Free Restorative Payments

• § 6.12 Enhancement of an Annuity Contract on Demutualization of the Issuer

• § 6.13 Applicability of Community Property Laws to Roth IRAs

• § 6.14 Arrangements Improperly Shifting Value to a Roth IRA from Related Entities
• —–[1] Value Shifts to a Roth IRA Generally
• —–[2] Roth Value Shifts Attacked as Prohibited Transactions
• —–[3] Roth Value Shifts Attacked by Reallocating Income and Deductions
• —–[4] Roth Value Shifts Attacked Under the Substance-Over-Form Doctrine
• ———-[a] IRS Initially Experienced Mixed Results Applying the Doctrine
• ———-[b] A Serious But Problematic Setback for the IRS in Applying the Doctrine
• —————[i] The Sixth Circuit Allowed Use of a DISC to Avoid Roth IRA Limits
• —————[ii] The Summa Court Appeared to Overlook a Significant Fact
• —————[iii] The Gregory Case Indicates a Lack of Substance in Summa
• —————[iv] The Summa Decision Reinforced by Two Subsequent Circuit Court Cases
• ———-[c] The Tax Court Distinguishes the Summa Case

• § 6.15 Tax Withholding from Distributions Made by Roth IRAs
• —–[1] Withholding Tax on Nonqualified Distributions from Roth IRAs
• —–[2] Election to Eliminate Withholding Tax for Nonqualified Distributions
• —–[3] Roth Conversions

• § 6.16 Tax on Net Investment Income Not Applicable

• • § 6.17 Estate or Gift Tax Imposed on Roth IRA Benefits
    • § 6.18 Roth IRA Contributions by Retirees Working Part-Time

» Chapter 7 – DESIGNATED ROTH ACCOUNTS