What is ‘Same Property Rule’
A regulation relating to IRA rollovers stipulating that whenever a financial asset is withdrawn from a retirement account or IRA (for the purpose of funding a new IRA, for example), it must be rolled over into the same property (or format) of an IRA. Unless the party involved is over 59.5 years of age, failure to comply with this rule will result in the IRS taxing the withdrawn asset as ordinary income.
Explaining ‘Same Property Rule’
Suppose George, a 50-year-old male, decided to buy some shares with money from his IRA account. After, he decides to place the shares in a new IRA in order to defer taxes. Since his withdrawal asset changed properties (it changed from cash to shares) during the rollover and he is under 59.5, he will end up owing tax on the withdrawn amount at a rate that equals his normal income tax rate and also incur a 10% penalty.
Same Property Rule FAQ
What are examples of property rights?
What role do property rights play in economy?
Why is property rights important?
What are the characteristics of property rights?
Why are property rights important for economic growth?
Why are property rights so important for markets?
What is the purpose of property rights?
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