@Linkat,
Linkat wrote:
Then this is not a rollover - this is a cash withdrawal and then a deposit into an IRA. Semantics I know but if you process a rollover as a rollover then there are no penalties or taxes charged.
A cash withdrawal from an IRA and then a deposit of that money into an IRA is a rollover. It may be semantics, but it is important.
If a distribution is paid to you, you have 60 days from the date you receive it to roll it over. Any taxable distribution paid to you is subject to a mandatory withholding of 20%, even if you intend to roll it over later. If you do roll it over, and want to defer tax on the entire taxable portion, you will have to add funds from other sources equal to the amount withheld. You can choose to have your employer transfer a distribution directly to another eligible plan or to an IRA. Under this option, the 20% mandatory withholding does not apply.
http://www.irs.gov/taxtopics/tc413.html
Trustee-to-Trustee Transfer
A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Because there is no distribution to you, the transfer is tax free. Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers.
http://www.irs.gov/publications/p590/ch01.html#d0e3521