Retirement tax questions

A Roth conversion is legally defined as a "qualified rollover contribution." Under the tax code, you cannot "roll over" any money that is classified as a Required Minimum Distribution. Here are some references that may pertain to you.

1. The Citation: 26 U.S. Code § 408(d)(3)(E) 
2. What it says: "Denial of rollover treatment for required distributions." It explicitly states that the rollover rules do not apply to any amount required to be distributed under section 401(a)(9) (the RMD rules).
3. The Logic: Since a Roth conversion is a rollover, and RMDs cannot be rolled over, an RMD cannot be converted.

2. The Treasury Regulation: The "First Dollars Out" Rule

1. This is the "gotcha" that forces the timing. The IRS has a regulation stating that if you are of RMD age, the very first money you take out of your IRA in a calendar year is legally deemed to be your RMD until that requirement is satisfied.
2. The Citation: 26 CFR § 1.408-8, Q&A-4 (specifically paragraph (a))
3. What it says: "The first dollars distributed during that year are treated as consisting of the required minimum distribution until an amount equal to the [RMD]... has been distributed."
4. The Logic: You cannot "skip over" the RMD to convert other funds first. Any attempt to convert money before taking your RMD results in the IRS viewing that "conversion" as actually being your RMD.

3. IRS Publication 590-A

For a plain-English explanation, the IRS clarifies this in their annual guide for taxpayers.

1. The Citation: IRS Publication 590-A, under the section "Can you move retirement plan assets?" and the sub-header "Required distributions."
2. What it says: "You cannot make a tax-free rollover of a required minimum distribution... Any amount converted to a Roth IRA is treated as a distribution from your traditional IRA and a rollover to the Roth IRA."

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