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Author: BruceSchiek Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121096  
Subject: Is this a roll over? Date: 10/12/1998 8:42 AM
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Last month I withdrew about $5500.00 from my IRA to cover some short term expenses. The financial crisis is now over and I have $5500.00 to place back in my IRA. Can I simply deposit this money back in the original account and avoid the early withdrawl penalties at tax time, treating this short term "loan" similar to an IRA rollover? If not, haow should I go about minimizing my tax penalty?

Thanks.

P.S. I am not in the habit of doing this with my investments, this was indeed a short term financial crisis!
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Author: piz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5736 of 121096
Subject: Re: Is this a roll over? Date: 10/12/1998 8:58 AM
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BruceSchiek wrote:
Last month I withdrew about $5500.00 from my IRA to cover some short term expenses. The financial crisis is now over and I have $5500.00 to place back in my IRA. Can I simply deposit this money back in the original account and avoid the early withdrawl penalties at tax time, treating this short term "loan" similar to an IRA rollover? If not, haow should I go about minimizing my tax penalty?

I had to do exactly the same thing about three years ago. I redeposited the amount I withdrew, right back into the same IRA account it came from, within the 60-day limit. I had no tax consequences at all. I suppose I could still be audited, but as far as I could determine at the time I broke no rules and owed no tax.

Piz

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5743 of 121096
Subject: Re: Is this a roll over? Date: 10/13/1998 12:14 AM
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[[Last month I withdrew about $5500.00 from my IRA to cover some short term expenses. The
financial crisis is now over and I have $5500.00 to place back in my IRA. Can I simply deposit this
money back in the original account and avoid the early withdrawl penalties at tax time, treating this
short term "loan" similar to an IRA rollover? If not, haow should I go about minimizing my tax
penalty?]]

As piz noted in his post, as long as the funds are returned within the 60 day period, you have no problems...at least on THIS transaction.

But what you have done is to "taint" the IRA in which you redeposited the funds. That means that you will not be allowed another "rollover" in this IRA for one year. So whatever you do, try to avoid another such crisis for at least a year. Not then, if you have another IRA account, you can have one rollover within the 12 month period in THAT specific account without any problem.

Remember finally that a "trustee to trustee" transfer is NOT considered a rollover. So if you decide to "move" your IRA (the "tainted" IRA) from one place to another, or from one broker to a new broker within the next year, do so via a "trustee to trustee" transfer and you should be just fine.

TMF Taxes
Roy

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