3996 / What is a rollover or rollover contribution and what are its tax effects?
A rollover or rollover contribution is the transfer of a distribution from a qualified plan, an IRC Section 403(b) tax sheltered annuity, an individual retirement plan, or an eligible Section 457 governmental plan. Distributions that are rolled over according to applicable IRC rules and regulations are not included in gross income until receipt at some time in the future ( Q 3998). A rollover to a Roth IRA generally is a taxable event ( Q 3662).
Once funds or properties are rolled over to an eligible retirement plan ( Q 4000), they generally are subject to the tax treatment given that plan.1 Different rules apply to distributions made from a traditional IRA to an eligible retirement plan other than an IRA. The portion of a distribution that is rolled over to an eligible retirement plan generally will be treated as coming first from nonafter-tax contributions and earnings in all of the IRAs of the owner.2 This rule effectively allows the owner to rollover the maximum amount permitted ( Q 3671).
A direct distribution from a traditional IRA or a Roth IRA to a charity will be tax-free if it meets the requirements of the qualified charitable distribution rules available in 2006 and thereafter ( Q 8112).