More guidance forthcoming after reversal of its prior, longstanding, interpretation.
March 31, 2014
The Internal Revenue Service has announced that beginning as early as January 1, 2015, taxpayers will be limited to one IRA rollover in any 12-month period, regardless of the number of IRAs owned. (See Announcement 2014-15).
Generally, Section 408(d)(3)(A)(i) of the Internal Revenue Code (the “Code”) provides that a distribution from an IRA will not be included in a taxpayer’s gross income to the extent that it is paid into a distributee’s IRA within 60 days after receipt of the distribution. The Code restricts these rollovers to one in any 12-month period.
The IRS, both in Proposed Treasury Regulation 1.408-4(b)(4)(ii) (published in 1981) and in IRS Publication 590, previously had interpreted the limitation to apply on an IRA-by-IRA basis, meaning that taxpayers could make multiple rollovers so long as the rollovers were made to different IRAs.
The Announcement to reverse its prior longstanding interpretation comes after the Tax Court decision in Bobrow v. Commissioner, T.C. Memo 2014-21, which found the one-per-year restriction applied on an aggregate basis, not an IRA-by-IRA basis.
The IRS intends to withdraw its Proposed Treasury Regulations and revise IRS Publication 590 consistent with the Bobrow Tax Court decision. This one-per-year guidance applies only to IRA rollovers, and not to direct IRA trustee-to-trustee transfers.
Jim Rourke is an associate with Nexsen Pruet's Tax Group in Columbia. His work is focused primarily in the areas of employee benefits and state and local taxation (SALT). He also works closely with business leaders to find and take advantage of tax credits.