IRS Withdraws Proposed Amendment to IRA Rollover Reg, Will Update Publication

By John Iekel • July 14, 2014 • 0 Comments
The IRS on July 11 announced that it is withdrawing a proposal it made in 1981 for an amendment to regulations governing IRA rollovers. The proposed amendment to Treas. Reg. § 1.408-4(b)(4)(ii) would have applied the rollover limitation on an IRA-by-IRA basis. This withdrawal affects individuals who maintain IRAs and financial institutions that are trustees, custodians, or issuers of IRAs.

The IRS made the announcement in response to Announcement 2014-15, which it issued on March 20. In that guidance, the IRS said that it would apply the U.S. Tax Court’s Jan. 28 ruling in Bobrow v. Commissioner, TC Memo 2014-21, in which the court said that holders of multiple IRAs are limited to one tax-free rollover in a single year. Under Bobrow, an individual cannot make an IRA-to-IRA rollover if the individual has made an IRA-to-IRA rollover involving any of the individual's IRAs in the preceding 1-year period. 

Announcement 2014-15 addresses the application to IRAs and individual retirement annuities of the one-rollover-per-year limitation of Code Section 408(d)(3)(B) and provides transition relief for owners. Consistent with that Announcement, the IRS will not apply the Bobrow interpretation of Section 408(d)(3)(B) to any rollover that involves a distribution occurring before Jan. 1, 2015.

The IRS also said that it will revise Publication 590, which contained language and instructions that were not consistent with the Bobrow ruling and subsequent IRS guidance.