Posted May 12, 2014 06:10 pm CDT
For years, an Internal Revenue Service rule allowed taxpayers to withdraw assets from a regular or Roth individual retirement account without penalty, so long as the assets were redeposited within 60 days and no more than one such withdrawal from each IRA was made every 12 months.
But a tax practice leader at Mayer Brown pushed that rollover rule, obtaining the use of around $65,000 in IRA money for six months by—along with his wife—making sequential withdrawals from multiple accounts, the Wall Street Journal (sub. req.) reports.
Now an adverse ruling in the personal case of New York partner Alvan Bobrow has resulted in a new rollover rule for all taxpayers.
Although Bobrow and his spouse were in compliance with an Internal Revenue Service rule on IRA rollovers, a federal Tax Court judge decided that the IRS had incorrectly interpreted the statutory provisions on which the withdrawal rule is based. Instead of permitting one withdrawal per IRA every 12 months, the judge held, the law allows one withdrawal, period, every 12 months, regardless of how many IRAs an individual has, the newspaper explains.
Rollovers, thus, are still permitted, but stricter rules will soon apply. (The WSJ says the IRS will not enforce the new interpretation of the law until next year.) Transfers, in which money is sent from one qualified IRA account to another without being used by the account holder, are not affected by the new rules for rollovers.
At last report, Bobrow, who was acting as his own counsel in the case, was moving for reconsideration of the Tax Court ruling. He was supported by a friend-of-the-court brief from the Board of Regents of the American College of Tax Counsel that was signed by former IRS commissioner Fred T. Goldberg Jr. and former assistant treasury secretary for tax policy Kenneth Gideon.