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A regulation relating to IRA rollovers stipulating that whenever a financial asset is withdrawn from a retirement account or IRA (for the purpose of funding a new IRA, for example), it must be rolled over into the same property (or format) of an IRA. Unless the party involved is over 59.5 years of age, failure to comply with this rule will result in the IRS taxing the withdrawn asset as ordinary income.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properties (it changed from cash to shares) during the rollover and he is under 59.5, he will end up owing tax on the withdrawn amount at a rate that equals his normal income tax rate and also incur a 10% penalty.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. Individual Retirement Account - ...

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

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

    The amount of income that is used to calculate an individual's ...
  5. Rollover

    A rollover is when you do the following: 1. Reinvest funds from ...
  6. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
Related Articles
  1. Tax-Saving Advice For IRA Holders
    Taxes

    Tax-Saving Advice For IRA Holders

  2. Common IRA Rollover Mistakes
    Personal Finance

    Common IRA Rollover Mistakes

  3. Will I incur a tax penalty when making ...
    Retirement

    Will I incur a tax penalty when making ...

  4. Want To Know How To Save For Retirement? ...
    Retirement

    Want To Know How To Save For Retirement? ...

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center