Understanding IRA transfers.

A direct transfer occurs when funds move directly from one IRA trustee or custodian to another, without the owner taking possession.

Tax treatment of direct IRA transfers.

Because the IRA owner never receives the funds, the IRS does not treat the transfer as a distribution.

There is:

No income tax

No early withdrawal penalty

No reporting as taxable income

Distinguish from rollovers.

A rollover may involve temporary receipt of funds and strict time limits.

A direct transfer avoids these risks entirely.

Evaluate each option.

A. Nontaxable event

Correct. Direct IRA-to-IRA transfers are tax-free.

B. Taxable event

Incorrect. No constructive receipt occurs.

C. Premature distribution

Incorrect. No distribution is made.

D. Required distribution

Incorrect. Required minimum distributions cannot be transferred.

Maryland relevance.

Maryland follows federal income tax treatment for IRA transfers.

Conclusion.

A direct IRA-to-IRA transfer is a nontaxable event.