Announcement 2014-15 - Transition relief for one-rollover-per-year limit for IRA rollovers 

March 20:  The IRS today released an advance copy of Announcement 2014-15 providing transition relief for the one-rollover-per-year limit for IRA rollovers.

Announcement 2014-15 [PDF 12 KB] states that the IRS will follow a Tax Court opinion in Bobrow v. Commissioner (rollover limitation applies on an aggregate basis; individual cannot make an IRA-to-IRA rollover if such a rollover involving any of the individual’s IRAs was made in the preceding one-year period).


However, the IRS stated that it would not apply the Tax Court’s interpretation of section 408(d)(3)(B) to any rollover that involves an IRA distribution occurring before January 1, 2015.

Background

Individual retirement accounts and individual retirement annuities (IRAs) are subject to a one-rollover-per-year limitation under section 408(d)(3)(B).


  • In general, the IRA rules provide that any amount distributed from an IRA will not be included in the gross income if the amount is “paid” (i.e., rolled over) into an IRA no later than 60 days after the individual receives the distribution.
  • An individual is permitted to make only one rollover in any one-year period.

Prop. Reg. section 1.408-4(b)(4)(ii) provides that this limitation is applied on an IRA-by-IRA basis.


The Tax Court, in Bobrow v. Commissioner [PDF 119 KB] however held that the IRA rollover limitation applies on an aggregate basis—i.e., an individual cannot make an IRA-to-IRA rollover if such a rollover involving any of the individual’s IRAs was made in the preceding one-year period.

Announcement 2014-15

Today’s release states that the IRS expects to follow the interpretation in Bobrow v. Commissioner.


Accordingly, the IRS today announced that it intends to withdraw the proposed regulation (and revise an IRS publication) to reflect the Tax Court’s interpretation.


This change will not affect the ability of an IRA owner to transfer funds from one IRA trustee directly to another because such a transfer is not a rollover and, therefore, is not subject to the one-rollover-per-year limitation.


The IRS also reported receiving comments about the administrative challenges presented by the Bobrow interpretation of section 408(d)(3)(B), and that adopting the Tax Court’s interpretation will require IRA trustees to make changes in the processing of IRA rollovers and in IRA disclosure documents—and this will take time to implement.


The IRS, therefore, announced that it will not apply the Bobrow interpretation of section 408(d)(3)(B) to any rollover that involves an IRA distribution occurring before January 1, 2015.


Also, regardless of the ultimate resolution of the Bobrow case, the Treasury Department and IRS expect to issue a proposed regulation under section 408 to provide that the IRA rollover limitation applies on an aggregate basis. This anticipated regulatory change would not be effective before January 1, 2015.




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