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

Scorecard preparation templates and tips

With Workiva, we've created a PowerPoint deck that helps you create your own scorecards -- quick reference reports used across organizations to update stakeholders on the performance of defined deliverables.

100th ANNIVERSARY

Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.