Proposed regulations - Only one IRA rollover per year allowed effective 2015 

July 10:  The Treasury Department and IRS today released for publication in the Federal Register a notice of partial withdrawal of proposed regulations (REG-209459-78) that concerns IRA-to-IRA rollovers and reflects the opinion of the U.S. Tax Court 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).

The withdrawal notice [PDF 177 KB] confirms that the IRS will 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—consistent with prior IRS guidance provided in Announcement 2014-15.

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.


In March 2014, the IRS issued Announcement 2014-15 stating that the IRS expected to issue guidance reflecting the Tax Court’s interpretation in Bobrow, and that it intended to withdraw the proposed regulation (and revise an IRS publication) to reflect the Tax Court’s interpretation. Read TaxNewsFlash-United States.

Withdrawal of portion of proposed regulations

As anticipated, the IRS and Treasury today announced the withdrawal of a portion of the proposed regulations concerning the treatment of distributions from IRAs—i.e., withdrawal of Reg. section 1.408-4(b)(4)(ii).


Specifically, this withdrawal notice provides that an individual cannot make an IRA-to-IRA rollover if the individual has made an IRA-to-IRA rollover involving any of the individual’s IRAs in the preceding one-year period.


This change will not apply to any rollover that involves an IRA distribution before January 1, 2015.


The IRS will also revise Publication 590.


Today’s release clarifies that this interpretation does not affect the ability of an IRA owner to transfer funds from one IRA trustee or custodian directly to another because this transfer technically is not a “rollover.”




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