IRA Rollover Rule
The Internal Revenue Code 408(d)(3)(A) provides 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. IRS Publication 590, Individual Retirement Arrangements, provides that this limitation is applied on an IRA-by IRA basis.
Earlier this year the tax court ruled in Bobrow v Commissioner, (T.C., Jan. 28, 201, 7022-11), that the one rollover per year rule applies to all IRAs, not each IRA. In the ruling the tax court reasoned:
“Had Congress intended to allow individuals to take nontaxable distributions from multiple IRAs per year, we believe section 408(d)(3)(B) would have been worded differently.”
The court ruling included the following:
“Regardless of how many IRAs he or she maintains, a taxpayer may make only one nontaxable rollover contribution within each one-year period”
First this ruling only applies to rollovers. Trustee-to-trustee direct transfers among IRAs are still unlimited.
The good news is the IRS announced it will not apply the Bobrow interpretation of 408(d)(3)(B) to any rollover that occurred before January 1, 2015. The IRS is expected to issue proposed regulations that will provide that the IRA rollover will apply on an aggregate basis However, in no event will the regulation be effective before January 1, 2015.