Tax Tip of the Week | No. 244 | Be Careful With IRA Rollovers

Tax Tip of the Week | April 2, 2014 | No. 244 | Be Careful With IRA RolloversA recent tax court ruling....

In Bobrow v. Commissioner (TC Memo 2014-21), the Tax Court ruled that the one-rollover-per-year rule applies to all of a taxpayer's IRAs rather than to each IRA separately. This ruling conflicts with IRS Publication 590 which gives the following example:“You have two traditional IRAs, IRA-1 and IRA-2. You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA.However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2.”The Tax Court, however, concluded that the section 408(d)(3)(B) limitation applies to all of a taxpayer's retirement accounts and that regardless of how many IRAs he or she maintains, a taxpayer may make only one nontaxable rollover contribution within each one-year period.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt - the guy behind TTW...until next week.