A rollover from a Traditional IRA to another IRA must be completed within 60 days to avoid tax consequences; what is the effect if not completed?

• A. Tax consequences would apply
• B. There would be no tax impact
• C. The transfer would be reversed automatically
• D. The funds would be taxed at a reduced rate

Answer: (A)

The 60-day rule for IRA rollovers is about deferring taxes. If you don’t complete the transfer to another IRA within 60 days, the IRS treats the amount as a distribution from the original IRA. That means it becomes taxable income for the year it was received, and if you’re under age 59½ you may also owe the 10% early withdrawal penalty (subject to exceptions). There isn’t an automatic reversal or a reduced tax rate—the funds are taxed as ordinary income, and penalties can apply if you’re early in age.