The tax law allows you to roll over funds from one traditional IRA to another tax-free. But you can only use this technique once a year.
Strategy: Apply the once-a-year limit to all your IRAs. Otherwise, according to a surprising new Tax Court case, you could be socked with a hefty tax bill. (Bobrow, TC Memo 2014-21)
The new case flies in the face of the IRS’ own interpretation of the rules.
Here’s the whole story: Usually, you don’t have to pay any tax when you roll over funds between IRAs, as long as the rollover is completed within 60 days. You can do whatever you want with the money during the 60-day period. What’s more, it doesn’t matter if you put the funds back in the same IRA or a different one. But the tax law limits such rollovers to one time a year.
Previously, as stated in Pub. 590, Individual Retirement Arrangements, the IRS applied this rule separately to each IRA. But now the Tax Court has extended the reach ...(register to read more)