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April 09, 2014 at 09:36 AM
IRA guru Ed Slott is warning advisors to notify their clients of the recent tax court ruling that says IRA holders can do only one IRA-to-IRA rollover per year, which runs counter to the IRS interpretation of the tax code.
The recommended way to move money from IRA to IRA is via direct transfers, where the money goes directly from one IRA to another — and the holder doesn’t touch the money.
However, in the Jan. 28 tax court decision, the petitioners were transferring money from IRA to IRA using direct rollovers, where the money is payable to the IRA holder, but the money has to be put back into another IRA within 60 days.
“Too many people do this” IRA-to-IRA rollover, Slott told ThinkAdvisor.
The Tax Court decided that neither the IRS nor the plaintiffs, the Bobrows, were correct on the treatment of two IRA rollovers done by Mr. Bobrow, Slott writes in his Slott Report. “Instead the Court ruled that only one of Mr. Bobrow’s rollovers was timely completed because, according to the court, an individual can only do one IRA-to-IRA rollover per year.”
