Originally posted on the Ascensus Todd’s Blog.
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A recent U.S. Tax Court ruling has set a lot of heads spinning in the IRA administration world, running counter as it does to more than two decades of IRS guidance. In the case Bobrow v. Commissioner, the Court looked at a situation where the taxpayer, Mr. Bobrow, had made two IRA rollovers within a 12-month period. Each rollover consisted of assets distributed from a different IRA. The Court disallowed Bobrow’s IRA rollover on the grounds that he was limited to one rollover per taxpayer per 12-month period, not one rollover per IRA.
Why is this ruling drawing so much attention? Primarily because it runs completely contrary to long-issued guidance provided by the IRS, the very agency that is now advocating this new position without any prior warning. The ability to execute IRA rollovers on a one-per-IRA basis has been described in detail in IRS Publication 590, Individual Retirement Arrangements (IRAs), for at least 20 years, that evidence readily available even now at the IRS’s own web site. It is not conveyed in a mere statement, but in detailed examples provided to explain the sometimes-misunderstood rollover limitations. The IRS’s own model IRA documents, on which millions of IRAs are based, state in their instructions “For more information on IRAs…see Pub. 590…”