Stop IRA Rollovers ‘Immediately,’ Expert Warns After Tax Ruling

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 wrote in his Slott Report. "Instead the court ruled that only one of Bobrow's rollovers was timely completed because, according to the court, an individual can only do one IRA-to-IRA rollover per year."

In IRS Publication 590, and in private letter rulings, Slott said that the "IRS has said that you can do one rollover per year, per account. If you had two IRA accounts, you could do one rollover from each account in a 365-day period (provided you didn't roll the money distributed from the first IRA into the second IRA)."

But with the tax court ruling, Slott said that "no matter how many IRAs you may have, you can only do one rollover per year"—that's 365 days, not a calendar year—"and this reasoning would also apply to Roth-to-Roth rollovers as well."

Slott told ThinkAdvisor.com that advisors should warn their clients of this ruling, because the IRS plans to revise Publication 590 to reflect this decision come Jan. 1, 2015. "Stop [IRA-to-IRA rollovers] immediately," Slott said, and "do direct transfers from now on because those are unlimited." —Melanie Waddell