Recently, the Internal Revenue Service (IRS) issued Announcement 2014-15, which redefines the application of the one-rollover-per-year rule for Individual Retirement Accounts (IRAs). Previously, the IRS had maintained (and had published in IRS Publication 590) that the one-rollover-per-year rule applied to IRAs on an IRA-by-IRA basis.
This spring, the US Tax Court made a decision that Section 408(d)(3)(8) of the Internal Revenue Code should be interpreted to mean that the rule should apply to all IRAs of an IRA account owner on an aggregate basis. In other words, an IRA account owner cannot make a non-taxable rollover from one IRA to another IRA if the account owner has already made an IRA-to IRA rollover from “any” one of his/her IRAs in the preceding one year period. If a second rollover is made during that period, any untaxed amounts distributed as part of a prior rollover must be included in gross income and may be subject to the 10% premature distribution penalty tax. Announcement 2014-15 becomes effective January 1, 2015. This announcement will not impact direct IRA trustee-to-trustee transfers. IRS Publication 590 will be revised to reflect this stricter interpretation.