IRS Guidance Applies “One-Per-Year” Limit to IRA Rollovers

The IRS has released Announcement 2014-15 indicating it will withdraw proposed regulations and will revise Publication 590 to limit tax-free IRA rollovers to one-per-year on an aggregate basis under Code Section 408(d)(3)(B).

 Code Section 408(d)(3)(B) provides generally that any amount distributed from an IRA will not be included in the gross income of the distributee to the extent the amount is paid into an IRA for the benefit of the distributee no later than 60 days after the distributee receives the distribution. Prior guidance interpreted Code Section 408(d)(3)(B) to limit IRA rollovers to one-per-year on an IRA-by-IRA basis.

 The Announcement follows the Tax Court’s opinion in Bobrow v. Commissioner, T.C. Memo 2014-21 which held that the one-per-year limitation applies on an aggregate basis, meaning that an individual could not make an IRA-to-IRA rollover if he or she had made such a rollover involving any of the individual’s IRAs in the preceding 1-year period. However, in order to allow IRA trustees to make changes in the processing of IRA rollovers, the IRS will not apply the new interpretation until January 1, 2015. The Announcement will also not affect the ability of an IRA owner to transfer funds from one IRA trustee directly to another as such a transfer is not a rollover.

 The text of Announcement 2014-15 is available at: http://www.irs.gov/pub/irs-drop/a-14-15.pdf.

© 2014 Parsonage Vandenack Williams LLC

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