One-IRA-rollover-a-year rule will be effective in 2015, IRS says

BY SALLY P. SCHREIBER, J.D.

Following up on its promise earlier in the year to follow the Tax Court’s holding that the limit of one rollover per year applies on an aggregate basis and not on an IRA-by-IRA basis, the IRS withdrew a proposed regulation from 1981, Prop. Regs. Sec. 1.408-4(b)(4)(ii), which had provided otherwise (REG-209459-78). The Service also announced that the new rule will not apply to any rollover that involves a distribution that occurs before Jan. 1, 2015, and that it will update IRS Publication 590, Individual Retirement Arrangements (IRAs), which still provides that the limitation is applied on an IRA-by-IRA basis.

Sec. 408(d)(3)(A)(i) permits a tax-free rollover of funds in a taxpayer’s IRA as long as the amount distributed to the taxpayer is paid into an IRA for the taxpayer’s benefit within 60 days, subject to the one-rollover-per-year limit of Sec. 408(d)(3)(B). The Tax Court in Bobrow, T.C. Memo. 2014-21, held that the limit applies to all of a taxpayer’s IRAs, in the aggregate, and that the petitioner in the case, who had made more than one rollover from more than one IRA during the tax year, was taxable on the full amount of the second rollover.

The IRS reiterated that the new interpretation of Sec. 408(d)(3)(B) will not affect an IRA owner’s ability to transfer funds from one IRA trustee to another (as opposed to the taxpayer’s getting a check and making the transfer himself or herself) because those transactions are not considered rollovers under Rev. Rul. 78-406 and therefore are not subject to the one-a-year limit.

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

SPONSORED REPORT

"We need to talk."

Start a conversation with your clients using these questions and checklist for post busy-season business development.

NEWS

Revenue recognition revisited

A reexamination of new revenue recognition rules has led to tinkering with the standard that is considered the biggest achievement of the convergence efforts of FASB and the International Accounting Standards Board.

INTERVIEW

Staying focused at the top

Olivia Kirtley, CPA, CGMA, an accomplished corporate director with almost 20 years of experience serving on boards, talks about strategic, risk, and compliance issues that keep board members up at night.