(2) Qualified distribution For purposes of this subsection
(A) In general The term qualified distribution means any payment or distribution
(i) made on or after the date on which the individual attains age 591/2,
(ii) made to a beneficiary (or to the estate of the individual) on or after the death of the individual,
(iii) attributable to the individuals being disabled (within the meaning of section
72 (m)(7)), or
(iv) which is a qualified special purpose distribution.
(B) Distributions within nonexclusion period
A payment or distribution from a Roth IRA shall not be treated as a qualified distribution under subparagraph (A) if such payment or distribution is made within the 5-taxable year period beginning with the first taxable year for which the individual made a contribution to a Roth IRA (or such individuals spouse made a contribution to a Roth IRA) established for such individual.
(C) Distributions of excess contributions and earnings The term qualified distribution shall not include any distribution of any contribution described in section
408 (d)(4) and any net income allocable to the contribution.
(3) Rollovers from an eligible retirement plan other than a Roth IRA
(A) In general Notwithstanding sections
402 (c),
403 (b)(8),
408 (d)(3), and
457 (e)(16), in the case of any distribution to which this paragraph applies
(i) there shall be included in gross income any amount which would be includible were it not part of a qualified rollover contribution,
(ii) section
72 (t) shall not apply, and
(iii) unless the taxpayer elects not to have this clause apply for any taxable year, any amount required to be included in gross income for such taxable year by reason of this paragraph for any distribution before January 1, 1999, shall be so included ratably over the 4-taxable year period beginning with such taxable year.
Any election under clause (iii) for any distributions during a taxable year may not be changed after the due date for such taxable year.
(B) Distributions to which paragraph applies This paragraph shall apply to a distribution from an eligible retirement plan (as defined by section
402 (c)(8)(B)) (other than a Roth IRA) maintained for the benefit of an individual which is contributed to a Roth IRA maintained for the benefit of such individual in a qualified rollover contribution.
(C) Conversions
The conversion of an individual retirement plan (other than a Roth IRA) to a Roth IRA shall be treated for purposes of this paragraph as a distribution to which this paragraph applies.
(D) Additional reporting requirements Trustees of Roth IRAs, trustees of individual retirement plans, persons subject to section
6047 (d)(1), or all of the foregoing persons, whichever is appropriate, shall include such additional information in reports required under section
408 (i) or
6047 as the Secretary may require to ensure that amounts required to be included in gross income under subparagraph (A) are so included.
(E) Special rules for contributions to which 4-year averaging applies In the case of a qualified rollover contribution to a Roth IRA of a distribution to which subparagraph (A)(iii) applied, the following rules shall apply:
(i) Acceleration of inclusion
(I) In general The amount required to be included in gross income for each of the first 3 taxable years in the 4-year period under subparagraph (A)(iii) shall be increased by the aggregate distributions from Roth IRAs for such taxable year which are allocable under paragraph (4) to the portion of such qualified rollover contribution required to be included in gross income under subparagraph (A)(i).
(II) Limitation on aggregate amount included The amount required to be included in gross income for any taxable year under subparagraph (A)(iii) shall not exceed the aggregate amount required to be included in gross income under subparagraph (A)(iii) for all taxable years in the 4-year period (without regard to subclause (I)) reduced by amounts included for all preceding taxable years.
(ii) Death of distributee
(I) In general If the individual required to include amounts in gross income under such subparagraph dies before all of such amounts are included, all remaining amounts shall be included in gross income for the taxable year which includes the date of death.
(II) Special rule for surviving spouse If the spouse of the individual described in subclause (I) acquires the individuals entire interest in any Roth IRA to which such qualified rollover contribution is properly allocable, the spouse may elect to treat the remaining amounts described in subclause (I) as includible in the spouses gross income in the taxable years of the spouse ending with or within the taxable years of such individual in which such amounts would otherwise have been includible. Any such election may not be made or changed after the due date for the spouses taxable year which includes the date of death.
(F) Special rule for applying section 72
(i) In general If
(I) any portion of a distribution from a Roth IRA is properly allocable to a qualified rollover contribution described in this paragraph; and
(II) such distribution is made within the 5-taxable year period beginning with the taxable year in which such contribution was made,
then section 72 (t) shall be applied as if such portion were includible in gross income.
(ii) Limitation Clause (i) shall apply only to the extent of the amount of the qualified rollover contribution includible in gross income under subparagraph (A)(i).
(4) Aggregation and ordering rules
(A) Aggregation rules Section
408 (d)(2) shall be applied separately with respect to Roth IRAs and other individual retirement plans.
(B) Ordering rules For purposes of applying this section and section
72 to any distribution from a Roth IRA, such distribution shall be treated as made
(i) from contributions to the extent that the amount of such distribution, when added to all previous distributions from the Roth IRA, does not exceed the aggregate contributions to the Roth IRA; and
(ii) from such contributions in the following order:
(I) Contributions other than qualified rollover contributions to which paragraph (3) applies.
(II) Qualified rollover contributions to which paragraph (3) applies on a first-in, first-out basis.
Any distribution allocated to a qualified rollover contribution under clause (ii)(II) shall be allocated first to the portion of such contribution required to be included in gross income.
(6) Taxpayer may make adjustments before due date
(A) In general
Except as provided by the Secretary, if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan).
(B) Special rules
(i) Transfer of earnings Subparagraph (A) shall not apply to the transfer of any contribution unless such transfer is accompanied by any net income allocable to such contribution.
(ii) No deduction Subparagraph (A) shall apply to the transfer of any contribution only to the extent no deduction was allowed with respect to the contribution to the transferor plan.
