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A regulation relating to IRA rollovers stipulating that whenever a financial asset is withdrawn from a retirement account or IRA (for the purpose of funding a new IRA, for example), it must be rolled over into the same property (or format) of an IRA. Unless the party involved is over 59.5 years of age, failure to comply with this rule will result in the IRS taxing the withdrawn asset as ordinary income.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properties (it changed from cash to shares) during the rollover and he is under 59.5, he will end up owing tax on the withdrawn amount at a rate that equals his normal income tax rate and also incur a 10% penalty.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

    An IRS-allowed movement of assets into or out of an individual ...
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. Retire In Style
    Savings

    Retire In Style

comments powered by Disqus
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  4. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
  5. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
  6. Underwriting

    1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments ...
Trading Center