The IRS has finalized proposed regulations issued in 2014 regarding the characterization of amounts when a distribution includes Roth amounts and goes to multiple destinations. The final regulations (TD 9769
) are substantively the same as the proposed regulations. The final regulations state that if disbursements are made from a taxpayer’s designated Roth account to the taxpayer and also to the taxpayer’s Roth IRA or designated Roth account in a retirement plan in a direct rollover, the pretax disbursement amounts will be allocated first to the direct rollover rather than being allocated pro rata to each destination. Also, a taxpayer can direct the allocation of pretax and after-tax amounts that are included in disbursements from a designated Roth account that are directly rolled over to multiple destinations. The regulations apply to distributions from designated Roth accounts made on or after Jan. 1, 2016, or an earlier date chosen by the taxpayer that is on or after Sept. 18, 2014.
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