Same Property Rule

AAA

DEFINITION of '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A regulation relating to IRA rollovers stipulating that whenever a financial asset is withdrawn from a retirement account or IRA (for the purpose of funding a new IRA, for example), it must be rolled over into the same property (or format) of an IRA. Unless the party involved is over 59.5 years of age, failure to comply with this rule will result in the IRS taxing the withdrawn asset as ordinary income.

INVESTOPEDIA EXPLAINS '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properties (it changed from cash to shares) during the rollover and he is under 59.5, he will end up owing tax on the withdrawn amount at a rate that equals his normal income tax rate and also incur a 10% penalty.

RELATED TERMS
  1. Income Tax

    A tax that governments impose on financial income generated by ...
  2. Rollover

    A rollover is when you do the following: 1. Reinvest funds from ...
  3. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  4. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  5. Taxable Income

    The amount of income that is used to calculate an individual's ...
  6. Self Invested Personal Pension ...

    A tax-efficient retirement savings account available in Great ...
RELATED FAQS
  1. Will I incur a tax penalty when making withdrawls from my IRA in excess of my SEPP?

    Unfortunately, the IRA is "locked" for five years because of the requirement that the substantially equal periodic payment ... Read Full Answer >>
  2. Places where I can open an IRA Account?

    An individual retirement account can be opened through a range of major financial institutions, including brokerage firms ... Read Full Answer >>
  3. What rate of return should I expect on my 401(k)?

    An employer-sponsored retirement plan such as a 401(k) can be a valuable tool in accumulating savings for the long-term. ... Read Full Answer >>
  4. How can an entrepreneur save for retirement?

    One of the benefits many companies offer their employees is the opportunity to contribute to some form of retirement savings ... Read Full Answer >>
  5. What would privatized Social Security mean for Americans?

    The current Social Security system in the United States operates in a pay-as-you-go framework; the Social Security taxes ... Read Full Answer >>
  6. How does a defined benefit pension plan differ from a defined contribution plan?

    Employer-sponsored retirement plans are divided into two categories of plans: defined benefit pension plans and defined contribution ... Read Full Answer >>
Related Articles
  1. Taxes

    Tax-Saving Advice For IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.
  2. Personal Finance

    Common IRA Rollover Mistakes

    Avoid paying excess taxes by learning some simple transfer rules.
  3. Retirement

    Track Your Retirement Money With These Apps

    Try these four mobile and online apps to stay on top of your retirement income – in brokerage accounts, IRAs, 401(k)s, even Social Security.
  4. Professionals

    Advisors: Don't Overlook Not-Yet-Rich Millennials

    Financial advisors looking to grow their practices should focus on potential high-net-worth millennials.
  5. Retirement

    Top 10 Mistakes To Avoid On Your IRA

    IRA rules are complicated. It's easy to make mistakes – and they can cost you big time.
  6. Retirement

    Converting A Traditional IRA To A Roth

    When is it a good idea to convert traditional IRA funds into Roth IRA funds? And when does it not make sense?
  7. Trading Strategies

    Top 7 Roth IRA Stocks for 2015

    Looking for stocks with long-term potential for your Roth IRA? Here are the top seven picks for 2015.
  8. Retirement

    When Is It Better To Forgo A Roth Account?

    Depending on how much you're currently earning, a traditional IRA sometimes offers more tax relief than its Roth counterpart.
  9. Retirement

    Top 10 Mistakes To Avoid On Your 401(k)

    Funding and managing your 401(k) is critical to a financially healthy retirement. Avoid these top 10 mistakes.
  10. Professionals

    Your Clients and the Changing Retirement Landscape

    For many, retirement might not be the full stoppage of work and living a life of leisure but rather one of slowly phasing out of the workforce.

You May Also Like

Hot Definitions
  1. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  2. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  4. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  6. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
Trading Center