Big and Bad News for IRA Owners

Historically, individuals who have invested in IRAs have had the ability to roll over each IRA on an annual basis.  Known as the one-rollover-per-year, the IRS’ own Publication 590 has detailed that each individual IRA can be rolled over once in any twelve month period.  However, that has just changed.

In 2008, Alvan Bobrow rolled over distributions from two separate IRAs.  He took the position that the rollovers were valid because they were done in a timely fashion.  He stated that the IRS’ own publication supported his position.  The IRS disagreed and stated that only one of the two rollovers were valid.  This dispute led to a hearing in the U.S. Tax Court.

The Tax Court, in a stunning ruling, asserted that Internal Revenue Code Section 408(d)(3)(B) allows only for one rollover from all accounts per year.  This decision determined that Mr. Bobrow owed an additional $51,298 in taxes and $10,260 in penalties.  The ruling is known as Bobrow v. Commissioner, T.C. Memo. 2014-21.

The upshot of this ruling is that IRA owners need to look into consolidation or patience.  Rollovers are often undertaken to keep up with ebbs and flows in the market.  However, it is strongly advised that prudent financial advice be sought in order to comply with the new interpretation of the law.


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