I received part of my ex-wife's Roth IRA from divorce & put it in my Roth IRA. Is it a rollover, conversion, or recharacterization? Or does it count as a contribution?

[Mr--B-]

During a divorce, I received part of my ex-spouse's Roth IRA.  It was passed from trustee to trustee (no cash was ever in my hands) directly into my own Roth IRA.  It was greater than the 5,500 allowed each year for a contribution.  But if this was a rollover, conversion or a recharacterization then I don't think it's a contribution so I won't worry about exceeding the 5,500 limit.

[Mr--B- · Accepted solution]

After I posted this question I contacted the IRS.  Here is their answer:

My transfer is considered an inherited Roth.  Because, in my case, it is due to either a

1) Divorce or

2) Separate Maintenance Decree (such as a PSA, Property and Support Settlement Agreement)

it is considered a tax-free transfer.  It is not a rollover, it is not a conversion, and it is not a recharacterization.  It is also not a contribution.  It is therefore not reported on my tax return.

So I don't need to report it at all on my tax-return and more importantly, there is no tax penalty.

[dmertz]

Note that this is only a non-reportable transfer incident to divorce if the transfer was performed trustee-to-trustee, without the money ever passing through your hands or your ex-wife's hands.  Note that if you received a check payable to your Roth IRA that you then forwarded to your Roth IRA custodian, while the check passed through your hands, the money did not.

However, you said that you "received cash" and put the money in your own Roth IRA, implying that a distribution was made to your ex-wife who gave you the money and a contribution was made by you to your Roth IRA.  Under these circumstances, this would be a Roth IRA distribution reportable by your ex-wife and a new regular contribution by you.  The amount contributed by you in excess of $5,500 would be an excess contribution.

[Mr--B-]

In this case, it was a trustee-to-trustee transfer.  I didn't receive cash outright.  It was a transfer from her Roth to my Roth IRA.  There was no "cash".  I'll modify my original question to clarify this.

[dmertz]

Then the guidance you got from the IRS is correct.  The transfer is not reportable.

[user2017220]

During divorce PSA I was given money from an IRA transfered to another IRA in my name only. How about when I took out the money after I was 60 to use it to buy a house.  It was not income that I was able to live on.  Is it taxed at the full amount as if it was income I earned?  Also need to know if that amount of money counts as income that puts me not eligible to receive subsidies on Health care . gov and I have to now pay all of it back???? I qualified for subsidies because my actual income was very low and I qualified,

[dmertz]

In most cases, a distribution from a traditional IRA is fully taxable.  A traditional IRA is a deferred-tax retirement account, therefore, distributions from a traditional IRA are taxable unless you have basis in nondeductible traditional IRA contributions.

The taxable amount Distributions from an IRA increase your AGI and therefore can affect your Premium Tax Credits.  You IRA distribution *is* part of you actual income.