Pursuant to Section 408(d)(3)(A)(i), generally, the Internal Revenue Code allows for only one non-taxable IRS rollover every 365 days[1]. Up until just last week the IRS interpreted this provision to mean that one rollover per year per IRA was permitted. The Tax Court disagreed in Bobrow v. Commissioner.
Pursuant to the Bobrow opinion, the IRS announced that it will follow the Tax Court’s interpretation. Accordingly, both the IRS and the Tax Court agree that if you make a tax-free rollover from one IRA you will not qualify for another tax-free rollover from any IRA for 365 days.
Fortunately, the IRS indicated that it will wait until January 1, 2015 to apply the Tax Court’s interpretation of Section 408(d)(3)(B). So plan accordingly. What’s allowable this year will not be permitted the next.
[1] Note that the Section 408(d)(3)(B) provides for one tax-free rollover during a 1-year period. Thus, if an individual makes a nontaxable rollover on December 31 of year 1, he may not make other nontaxable rollover until December 31 of year 2.