IRS Clarifies IRA Rollover Ground Rules

Taxpayers have long been allowed to withdraw funds from an IRA, and not be taxed on the distributions as long as the sum was paid back to an IRA within a 60 day period – and this sort of transaction has only been allowed only once per year.

Proposed IRS regulations and IRS Publication 590 provide that this limitation is to be applied on an “IRA by IRA” basis, although the recent Tax Court decision (Bobrow v. Commissioner) stands for the notion that this limitation is to be applied on an “aggregate” basis, in cases where a taxpayer has multiple IRAs in place.

So, IRS recently notified taxpayers (Announcement 2014-15) that it will follow Bobrow, and accordingly intends to withdraw the proposed regulation and revise Publication 590.

As a timing matter, IRS will not apply Bobrow, however, to any rollover occurring before January 1, 2015.