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Tax Free Rollovers further restricted ! The Bobrow Decision (TC memo. 2014-21)

Tax Free Rollovers further restricted !  The Bobrow  Decision  (TC  memo. 2014-21)

Many people believe you can have a tax free rollover from a retirement account once a year.

Furthermore, they believe you can have as many rollovers as you have accounts.

NOT  TRUE  AFTER  12-31-2014!

In Bobrow, the Tax Court stated  that a person can have ONE tax free rollover in a 365 day period . (NOT A CALENDAR YEAR ) . IRRESPECTIVE of how many accounts they do have.

IRS Announcement 2014-15

So be warned that effective 1-1-2015,  if you roll over more than one time in a 365 day  period, the rollovers after the first one are taxable and if you are under 59.5 they are subject to a 10% penalty.

Some Good News

A direct transfer from one trustee to another is NOT a rollover for this rule. It is a trustee to trustee transfer and you can do as many as you want .

A rollover is taking a distribution from one account and then making a deposit into another account. Basically, receiving a check and depositing it within 60 days in another qualified account.

As with any decision in the area of income tax, the seas are fraught with peril. It’s better to ask first , then make your transaction.

 

June 12, 2014