J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

8.10 Tax-Free Rollovers and Direct Transfers to Traditional IRAs

There are two types of tax-free rollovers that you can make to a traditional IRA. You may roll over funds to a traditional IRA from a qualified company or self-employed retirement plan, 403(b) plan, or governmental 457 plan (7.8). If you own a traditional IRA, you may use a rollover within 60 days of receiving a distribution to switch funds to another trditional IRA, although another option, a direct transfer, is a more advantageous way of changing IRA investments, as discussed below.

Inherited IRA. A surviving spouse beneficiary who withdraws funds from an inherited IRA can do a 60-day rollover (see below), but a nonspouse beneficiary cannot roll over a withdrawal. However, a nonspouse beneficiary as well as a surviving spouse beneficiary can make a direct trustee-to-trustee transfer to another traditional IRA (8.14).

Direct transfer from one IRA to another.

A direct transfer is made by instructing the trustee of a traditional IRA to transfer all or part of your account to another IRA trustee. Direct transfers are tax free because you do not receive the funds. With a direct transfer, there is no risk of missing the 60-day deadline for rolling over a withdrawal into a new IRA. The tax law does not require a waiting period between direct transfers, whereas rollovers are subject to a once-a-year limitation, as discussed below.

For example, assume you have a traditional IRA at Bank “A” and decide to switch your account ...