IRA IRA Rollovers and Transfers 2

Question 1

A spouse who inherits an IRA has which unique rollover option not available to non-spouse beneficiaries?

Accepted Answer

Rolling the inherited IRA into their own IRA

Answer

A surviving spouse can roll the inherited IRA into their own IRA, treating it as their own account and delaying RMDs until they reach RMD age.

Question 2

What is a 'conduit IRA' and why was it important historically?

Accepted Answer

An IRA used to hold rollover funds separately to preserve the ability to roll them back into an employer plan

Answer

A conduit IRA held only employer plan rollover funds to preserve the option to roll them back into a new employer plan, though most employer plans now accept rollovers from commingled IRAs.

Question 3

How long does the IRS allow to complete a 60-day rollover if the delay was due to a financial institution error?

Accepted Answer

The IRS may grant a waiver allowing more time

Answer

The IRS can waive the 60-day rollover requirement if the failure was due to an error beyond the taxpayer's control, such as a financial institution mistake.

Question 4

When converting a traditional IRA to a Roth IRA, what is the tax treatment of the converted amount?

Accepted Answer

It is treated as ordinary income in the year of conversion

Answer

The taxable portion of a Roth conversion is included in ordinary income in the year the conversion occurs.

Question 5

Can a non-deductible traditional IRA contribution be converted to a Roth IRA without paying taxes?

Accepted Answer

Yes, the after-tax basis is not taxed, but the pro-rata rule may apply

Answer

Only the after-tax (non-deductible) portion of the conversion is tax-free, but the pro-rata rule requires proportional taxation based on all traditional IRA balances.

IRA - Individual Retirement Account Practice Test

IRA - Individual Retirement Account Practice Test

IRA IRA Rollovers and Transfers 2