Employee Benefits Blog

Posts tagged IRA trustee-to-trustee transfers

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IRS Clarifies Effective Date of New IRA Rollover Timing Restriction

As we discussed in a post earlier this year, the United States Tax Court issued a decision in early 2014 which will significantly restrict the ability of IRA owners to take a distribution from an IRA with the intention of escaping tax by rolling it over to another IRA within 60 days.  Code Section 408(d)(3)(B) states that the rollover exclusion does not apply to a second IRA distribution if, at any time during the 1-year period ending on the date of the second distribution, the individual received a previous IRA distribution and rolled it over into an IRA.  For many years, the IRA industry believed that the “once a year” limitation applied on an IRA-by-IRA basis, and not globally to all IRAs owned by a single individual.

The Tax Court case, Bobrow v. Commissioner, held that the plain language of the statute requires that the limitation apply on an aggregate basis.  Subsequently, the IRS indicated in Announcement 2014-15 that it will follow the Bobrow decision and will apply the limitation on an aggregate basis.  However, and helpfully, the announcement also stated that it would not apply the aggregate limitation to distributions occurring before January 1, 2015.

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Tax Court Decision Rocks IRA Rollover World

Earlier this year, the United States Tax Court issued a decision which will create significant new potential traps for individuals who take a distribution from an IRA with the intention of escaping tax by rolling it over to another IRA within 60 days.