Multiple IRAs and Rollovers in a 12 month period

[Guest quefre]

What are members reactions to this T.C. memo (Bobrow v Commissioner T.C. Memo. 2014-21) applying the rollover waiting period to all IRAs that a taxpayer maintains?

[masteff]

http://www.ustaxcourt.gov/InOpHistoric/BobrowMemo.Nega.TCM.WPD.pdf

"Regardless of how many IRAs he or she maintains, a taxpayer may make only one nontaxable rollover contribution within each one-year period."

That completely contradicts the IRS' own example in Publication 590, see page 25: http://www.irs.gov/pub/irs-pdf/p590.pdf (Here's the 2008 version since that's the tax year at issue: http://www.irs.gov/pub/irs-prior/p590--2008.pdf It has the same example.) I also disagree w/ the table on page 6 in the Memo because again Pub 590 says a rollover can be done to the same IRA; the only way that table works is if you require the money go into a different IRA than it was distributed from.

[ForksnKnives]

The court is definitely saying Pub. 590's example is wrong. The court's discussion of the statuory language on pages 12-13 explain why. If 408(d) said "an individual retirement account" and then later used language identifying the limitation to that same IRA then the statute would make the IRS interpretation correct, but that isn't what the statute says. Court wins, IRS loses. The IRS should have corrected its guidance twenty years ago.

[jpod]

If the position of the IRS - institutionally - is still in fact what is stated in the Publication, what could have happened here is that the IRS lawyer, who was zealously trying to win his case, made a contrary argument without checking with the IRS' National Office, and didn't think to search the IRS website, and the Tax Court bought his argument. This happens from time to time, very rarely, but it happens. If it happened here it wouldn't surprise me if the IRS concedes the case it just won.

[Guest quefre]

ASPPA is seeking the official IRS position on this.

Ascensus has released its position on this issue - http://www.ascensus.com/CompanySite/Utility/News/index.htm?NewsID=1709

[masteff]

Please keep us posted on further developments!

[Bird]

I wonder if the outcome would have been different if the taxpayer had referenced Pub 590 and said he relied on it. Apparently, the Pub wasn't brought up.

[Belgarath]

The whole thing seems a little ridiculous, statutory arguments aside.

If I have 10 different IRA accounts with $10,000 in each one, using the guidance in Pub. 590, I can take 1 distribution from each one, and roll them all back in within 60 days - once per year. So I have in my hot little hands $100,000 for 60 days.

OK, so now we adopt the court's interpretation. I do a direct transfer of 9 of the IRA's into the 10th, then take 100,000 from the 10th IRA, and roll it back in within 60 days. Same result!

Granted that the court's interpretation reduces the flexibility of the timing of distributions, it otherwise seems rather meaningless. Maybe I'm missing something. If I had tons of money in separate IRA's, I'd probably feel differently. But then, if I had tons of money in ANY IRA's, I wouldn't be doing this...

[Guest quefre]

An excellent blog from Ascensus discussing the issues - http://erisanews.blogspot.com/2014/02/tax-court-ruling-and-irs-rollover.html