[Federal Register Volume 79, Number 133 (Friday, July 11, 2014)]
[Proposed Rules]
[Pages 40031-40032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-16281]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-209459-78]
RIN 1545-BL98
Individual Retirement Plans and Simplified Employee Pensions;
Partial Withdrawal
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Partial withdrawal of notice of proposed rulemaking.
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SUMMARY: This document withdraws part of a notice of proposed
rulemaking that specifically relates to rollovers from individual
retirement arrangements (IRAs). The partial withdrawal of the proposed
regulation will affect individuals who maintain IRAs and financial
institutions that are trustees, custodians, or issuers of IRAs.
DATES: As of July 11, 2014, the proposed amendment to Sec. 1.408-
4(b)(4)(ii), published Tuesday, July 14, 1981 (46 FR 36198), is
withdrawn.
FOR FURTHER INFORMATION CONTACT: Vernon S. Carter at (202) 317-6700
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 408(d) governs distributions from IRAs. Generally, section
408(d)(1) provides that any amount distributed from an IRA is
includible in gross income by the payee or distributee. Section
408(d)(3)(A)(i) allows a payee or distributee of an IRA distribution to
exclude from gross income any amount paid or distributed from an IRA
that is subsequently paid into an IRA not later than the 60th day after
the day on which the payee or distributee receives the distribution.
Section 408(d)(3)(A)(i) and (d)(3)(D)(i). Section 408(d)(3)(B) provides
that an individual is permitted to make only one nontaxable rollover
described in section 408(d)(3)(A)(i) in any 1-year period.
On July 14, 1981, the Federal Register published proposed
regulations (46 FR
[[Page 40032]]
36198) that would have amended Sec. 1.408-4 of the Income Tax
Regulations by adding a new paragraph (b)(4)(ii). Those proposed
regulations provide that the rollover limitation of section
408(d)(3)(B) is applied on an IRA-by-IRA basis. This rule is reflected
in IRS Publication 590, Individual Retirement Arrangements (IRAs).
However, section 408(d)(3)(B) provides that the exclusion from gross
income for IRA rollovers pursuant to subparagraph (A)(i) does not apply
``if at any time during the 1-year period ending on the day of such
receipt such individual received any other amount described in that
subparagraph from an individual retirement account or an individual
retirement annuity which was not includible in his gross income because
of the application of this paragraph.''
Based on the language in section 408(d)(3)(B), a recent Tax Court
opinion, Bobrow v. Commissioner, T.C. Memo. 2014-21, held that the
limitation applies on an aggregate basis. Thus, under Bobrow, an
individual cannot make an IRA-to-IRA rollover if the individual has
made an IRA-to-IRA rollover involving any of the individual's IRAs in
the preceding 1-year period. The IRS intends to follow the opinion in
Bobrow and, accordingly, is withdrawing paragraph (b)(4)(ii) of Sec.
1.408-4 of the proposed regulations and will revise Publication 590.
This interpretation of the rollover rules under section 408(d)(1)(B)
does not affect the ability of an IRA owner to transfer funds from one
IRA trustee or custodian directly to another, because such a transfer
is not a rollover and, therefore, is not subject to the one-rollover-
per-year limitation of section 408(d)(3)(B). See Rev. Rul. 78-406,
1978-2 C.B. 157.
In response to comments expressing concern over implementation of
the rollover limitation as interpreted in Bobrow, the IRS released
Announcement 2014-15, 2014-16 I.R.B. 973, on March 20, 2014.
Announcement 2014-15 addresses the application to Individual Retirement
Accounts and Individual Retirement Annuities of the one-rollover-per-
year limitation of section 408(d)(3)(B) and provides transition relief
for owners. Consistent with that Announcement, the IRS will not apply
the Bobrow interpretation of section 408(d)(3)(B) to any rollover that
involves a distribution occurring before January 1, 2015.
List of Subjects in 26 CFR Part 1
Treatment of distributions from individual retirement arrangements.
Partial Withdrawal of Proposed Rulemaking
For the reasons stated in the preamble and under the authority of
26 U.S.C. 7805, the Internal Revenue Service withdraws the proposed
amendment to Sec. 1.408-4(b)(4)(ii).
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2014-16281 Filed 7-10-14; 8:45 am]
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