Jump to Navigation

ASK THE EDD ATTORNEY - HOW MANY TIMES MAY YOU ROLLOVER YOUR IRA(S) IN A SINGLE YEAR WITHOUT A PENALTY? ONCE!

By Robert S. Schriebman

January 21, 2015

Introduction

There has been up to now a conflict in the tax law over how many IRAs you can "rollover" in a given year without being penalized. The prevailing view had been, up to now, that you are allowed to rollover each IRA once in each year. In 2014, the U.S. Tax Court decided the case of A.L. Bobrow and ruled that you could only rollover one IRA per year without being penalized.
After the Bobrow case a conflict existed between the Tax Court's restricted view and the IRS's traditional liberal view that allowed each IRA to be rolled over one time in a given year without being penalized. These rules have now changed effective January 1, 2015.

IRS announcement 2014-15 addresses the application to Individual Retirement Accounts and Individual Retirement Annuities (IRAs) of the one-rollover-per-year limitation of IRC § 408(d)(3)(B) and provides transition relief for owners of IRAs.

Most people know that if they receive a distribution from an IRA that distribution is included in the recipient's gross income unless the IRA proceeds are "rolled over" into a new IRA no later than 60 days from the date the distribution is received. IRC § 408(d)(3)(B) provides that an individual is permitted to make only one rollover in any one-year period. However, there is an ambiguity in the tax law for individuals who receive distributions from more than one IRA each year or who change trustees within the year (See IRS publication 590, Individual Retirement Arrangement (IRAs)). For those having more than one IRA the IRS has allowed each IRA to be rolled over without receiving any penalties at all. The Bobrow case changed all of this.

Bobrow v Commissioner, T.C. Memo. 2014-21.

The Bobrow case held that the once-a-year limitation on IRA rollovers 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 one-year period.

The IRS had announced that it will follow the interpretation of IRC § 408(d)(3)(B) in the Bobrow decision and will revising Publication 590 to the extent needed to follow that interpretation. These actions by the IRS will not affect the ability of an IRA owner to transfer funds from one IRA trustee directly to another trustee because such a transfer is not considered a rollover and, therefore, is not subject to the one-rollover-per-year limitation.

The IRS announcement is intended to apply to any rollover on or after January 1, 2015, and will not apply to previous multiple IRA rollovers.

If you would like more information you may send an email to the IRS at the following address:

[email protected]

***.

An EDD attorney, Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States.

As a trusted EDD lawyer, Robert S. Schriebman has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure", both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures - A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures - A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure", both published by Commerce Clearing House.

Web Site Article 155