Barry C Picker, CPA/PFS, CFP
Some taxpayers are attempting to convert their traditional IRAs to Roth IRAs in the year they turn 70½ by postponing their first required minimum distribution until the first three months of the following year.
PLEASE BE ADVISED that the IRS' position on this issue is that you CANNOT postpone the required minimum distribution and convert your traditional IRA to a Roth. This is made very clear in Reg 1.408A-4, Q&A-6. You MUST take your required minimum distribution prior to conversion.
In Reg 1.408A-4, Q&A-1, A-1(c), the regulation states that even if the conversion from a traditional IRA is accomplished by means of a trustee to trustee transfer, it is a qualified rollover for purposes of both Sec 408 and Sec 408A. By being a rollover, and not a trustee to trustee transfer, the rule of Sec 408(d)(3)(E) which prohibits the rollover of a required distribution is applicable.
I personally disagree with the IRS on their position, mainly because a minimum distribution is not required until April 1st of the year following the attainment of age 70½. However I have yet to find a taxpayer willing to be the test case to litigate this issue. Frankly, the cost would be too high for someone to voluntarily choose to be a test case. However I suspect that someone will surface who did an improper conversion in this matter, and will be forced to litigate the issue in an attempt to avoid all the negative results of an improper conversion. Otherwise, anyone who has already done this type of conversion, should go ahead and recharacterize their transfer back to a traditional IRA.