Same Property Rule
What is the Same Property Rule?
The same property rule is an IRS rule stating that taken from an Individual Retirement Account must be placed into a similar type of account if the account holder is less than 59.5 years old.
How Does the Same Property Rule Work?
Let's say John Doe has an IRA that he opened when he was 15. He is now 45 and wants to the with another IRA he opened a few years ago. The IRS's same property rule allows him to do this, because he is moving money from an IRA to an IRA. If he were moving the money from an IRA to a trading account or a Certificate of , for example, he would be violating the same property rule.
If the original IRA held, say, just of Company XYZ and in moving the decides to sell the shares and just the proceeds in the new IRA, he would also be violating the same property rule because he did not move the shares from the original IRA to the new IRA.
Why Does the Same Property Rule Matter?
Violating the same property rule isn't illegal, it just generates a huge tax penalty if the accountholder is less than 59.5 years old (that's the age at which you can withdraw IRA that violate the same property rule are subject to ordinary income tax plus a 10% penalty.for use in retirement). Specifically, any