New IRA Rollover Rules


The Internal Revenue Code generally provides that an amount distributed from an IRA will not be included in gross income of the IRA owner to the extent the amount is rolled into an IRA of the owner, no later than 60 days after the distribution. This is often referred to as the “60 day rollover rule.” The Internal Revenue Code provides that an individual is permitted to make only one nontaxable 60-day rollover between IRAs in any one-year period.

The Internal Revenue Service previously has interpreted this requirement through both Regulations and Publications as being applied on an IRA-by-IRA basis. That meant that previous to this new interpretation, each IRA could be rolled once within a one-year period. Therefore, to the extent a taxpayer had more than one IRA, multiple rollovers could occur within a year.

The Tax Court, in a decision titled Bobrow v Commissing T.C. Memo 2014-21, has changed the rule. The Tax Court held that the one-year limitation applies on an aggregate basis. That means that a taxpayer cannot make more than one nontaxable 60-day rollover within each one-year period even if the rollover involves different IRAs. The IRS has announced that it will follow the Tax Court’s interpretation of the statute. The IRS has withdrawn the regulation supporting the old interpretation and will change future publications to comply with the Tax Court’s interpretation.

The following is an interpretation of the new IRA rollover rules. The rules are complicated because the IRS has allowed for transitional relief and will not enforce the new rules before 2015.

New IRA Distribution and Rollover Rules

1) The IRS will enforce the new rules for distributions from IRAs that occur after January 1, 2015.

2) Individuals receiving an IRA distribution on or after January 1, 2015 cannot rollover any portion of the distribution into an IRA if the individual has received a distribution from any IRA in the preceding one-year period that was rolled into an IRA.

  1. The one year period is applied on a fiscal year basis not a calendar year basis.

3) A rollover from a traditional IRA to a Roth IRA (a conversion) is not subject to the one-rollover-per-year limitation.

  1. Such a rollover is disregarded in applying the one-rollover-per-year limitation.
  2. But – a rollover between an individual’s Roth IRA’s would preclude a separate rollover within the one-year period between the individual’s traditional IRAs and another Roth to Roth rollover during the one-year period.

4) The one-rollover-per-year limitation does not apply to or from a qualified plan.

5) The one-rollover-per-year limitation does not apply to trustee-to-trustee transfers of IRAs.

6) Transitional rule for 2015 distributions is as follows:

  1. A distribution occurring in 2014 that was rolled over is disregarded for purposes of determining whether a 2015 distribution can be rolled over provided:
  • i. The 2015 distribution is from a different IRA that neither made nor received a 2014 distribution.

As you can determine from the above narrative, you must be careful and thoughtful before rolling an IRA. Please contact us if you have any questions on this subject.

Sincerely,

Sandy and Katie
Bull & Associates

P.S. Please keep us in mind if you have the opportunity to refer a potential client. We welcome the opportunity to present our firm to new clients.

Disclaimer: The above discussion is a summary that does not include all the rules and possible variations of events. It is provided solely for general information. Consult a tax professional before making decisions on this topic.