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60-day period after you receive it, the rollover period is ex-
tended. An amount is a frozen deposit if you can't with-
draw it because of either:
•
The bankruptcy or insolvency of the financial institu-
tion, or
•
A restriction on withdrawals by the state in which the
institution is located because of the bankruptcy or in-
solvency (or threat of it) of one or more financial insti-
tutions in the state.
The 60-day rollover period is extended by the period for
which the amount is a frozen deposit and doesn't end ear-
lier than 10 days after the amount is no longer a frozen de-
posit.
Retirement bonds. If you redeem retirement bonds pur-
chased under a qualified bond purchase plan, you can roll
over the proceeds that exceed your basis tax free into an
IRA or qualified employer plan. Subsequent distributions
of those proceeds, however, don't qualify for the 10-year
tax option or capital gain treatment.
Annuity contracts. If an annuity contract was distributed
to you by a qualified retirement plan, you can roll over an
amount paid under the contract that is otherwise an eligi-
ble rollover distribution. For example, you can roll over a
single-sum payment you receive upon surrender of the
contract to the extent it is taxable and isn't an RMD.
Rollovers of property. To roll over an eligible rollover
distribution of property, you must either roll over the actual
property distributed or sell it and roll over the proceeds.
You can't keep the distributed property and roll over cash
or other property.
If you sell the distributed property and roll over all the
proceeds, no gain or loss is recognized on the sale. The
sale proceeds (including any portion representing an in-
crease in value) are treated as part of the distribution and
aren't included in your gross income.
If you roll over only part of the proceeds, you are taxed
on the part you keep. You must allocate the proceeds you
keep between the part representing ordinary income from
the distribution (its value upon distribution) and the part
representing gain or loss from the sale (its change in value
from its distribution to its sale).
Example 1. On September 4, 2023, Paul received an
eligible rollover distribution from his employer's noncontri-
butory qualified employee plan of $50,000 in nonemployer
stock. On September 24, 2023, he sold the stock for
$60,000. On October 2, 2023, he contributed $60,000
cash to a traditional IRA. Paul doesn't include either the
$50,000 eligible rollover distribution or the $10,000 gain
from the sale of the stock in his income. The entire
$60,000 rolled over will be ordinary income when he with-
draws it from his IRA.
Example 2. The facts are the same as in Example 1,
except that Paul sold the stock for $40,000 and contrib-
uted $40,000 to the IRA. Paul doesn't include the $50,000
eligible rollover distribution in his income and doesn't de-
duct the $10,000 loss from the sale of the stock. The
$40,000 rolled over will be ordinary income when he with-
draws it from his IRA.
Example 3. The facts are the same as in Example 1,
except that Paul rolled over only $45,000 of the $60,000
proceeds from the sale of the stock. The $15,000 pro-
ceeds he didn't roll over include part of the gain from the
stock sale. Paul reports $2,500 ($10,000 ÷ $60,000 ×
$15,000) as capital gain and $12,500 ($50,000 ÷ $60,000
× $15,000) as ordinary income.
Example 4. The facts are the same as in Example 2,
except that Paul rolled over only $25,000 of the $40,000
proceeds from the sale of the stock. The $15,000 pro-
ceeds he didn’t roll over include part of the loss from the
stock sale. Paul reports $3,750 ($10,000 ÷ $40,000 ×
$15,000) capital loss and $18,750 ($50,000 ÷ $40,000 ×
$15,000) ordinary income.
Property and cash distributed. If both cash and prop-
erty were distributed and you didn't roll over the entire dis-
tribution, you may designate what part of the rollover is al-
locable to the cash distribution and what part is allocable
to the proceeds from the sale of the distributed property. If
the distribution included an amount that isn’t taxable
(other than the NUA in employer securities) as well as an
eligible rollover distribution, you may also designate what
part of the nontaxable amount is allocable to the cash dis-
tribution and what part is allocable to the property. Your
designation must be made by the due date for filing your
tax return, including extensions. You can't change your
designation after that date. If you don't make a designation
on time, the rollover amount or the nontaxable amount
must be allocated on a ratable basis.
Qualified domestic relations order (QDRO). You may
be able to roll over tax free all or part of a distribution from
a qualified retirement plan that you receive under a
QDRO. (See Qualified domestic relations order (QDRO)
under General Information, earlier.) If you receive the dis-
tribution as an employee's spouse or former spouse (not
as a nonspouse beneficiary), the rollover rules apply to
you as if you were the employee.
Rollover by surviving spouse. You may be able to roll
over tax free all or part of a distribution from a qualified re-
tirement plan you receive as the surviving spouse of a de-
ceased employee. The rollover rules apply to you as if you
were the employee. You can roll over the distribution into a
qualified retirement plan or a traditional or Roth IRA. For a
rollover to a Roth IRA, see Rollovers to Roth IRAs, later.
A distribution paid to a beneficiary other than the em-
ployee's surviving spouse is generally not an eligible roll-
over distribution. However, see Rollovers by nonspouse
beneficiary next.
Rollovers by nonspouse beneficiary. If you are a des-
ignated beneficiary (other than a surviving spouse) of a
deceased employee, you may be able to roll over tax free
all or a portion of a distribution you receive from an eligible
retirement plan of the employee. The distribution must be
a direct trustee-to-trustee transfer to your traditional or
30 Publication 575 (2023)