In Uncategorized on 04/15/2014 at 13:40

This is a sequel to my blogposat “Practicing in Tax Court Can Be Hazardous”, 1/28/14, the saga of Alvan L. Bobrow and Elisa S. Bobrow.

The Bobrows come bobbing back to Tax Court, assisted by The American College of Tax Counsel, to which august body I do not belong. And although Judge Nega seems not disposed to grant Alvan’s sought-after Rule 161 reconsideration, there is a happy ending for Alvan and the collegiates in Alvan L. Bobrow & Elisa S. Bobrow, Docket No. 7022-11, filed 4/15/14.

Alvan and the collegiates were arguing that Pub 590 says you can do one rollover annually for each of your IRAs, although Judge Nega said in 2014 T. C. Memo. 21 that Section 408(d)(3)(b) lets you roll only one annually, however many you have.

The collegiates “…also noted that section 1.408-4(b)(4)(ii), Proposed Income Tax Regs., 46 Fed. Reg. 36206 (July 14, 1981) (the proposed regulation), served as the basis for the relevant portion of Publication 590. The College’s amicus brief argued that the Court should reconsider our holding to conform with Publication 590. Additionally, the College argued that section 1.6662-4(d)(3)(iii), Income Tax Regs., allows proposed regulations to serve as sources of substantial authority that would mitigate or negate a section 6662 accuracy-related penalty.” Order, at pp. 2-3.

But Judge Nega will have none of it. “Neither petitioners nor respondent raised Publication 590 or the proposed regulation in their opening briefs, reply briefs, or sur-reply briefs. Petitioners first discussed Publication 590 in their motion for reconsideration but did not discuss the proposed regulation. Petitioners assert in their motion for reconsideration that Publication 590 should inform our interpretation of section 408(d)(3)(B) and that, at a minimum, Publication 590 provides petitioners with reasonable cause for their position, sufficient to negate the section 6662 penalty.

“Respondent first discussed Publication 590 and the proposed regulation in the Notice of Objection. Respondent acknowledged that Publication 590 and the proposed regulation should have been addressed in respondent’s briefs.” Order, at p. 3.

And to drive home the point, Judge Nega turns waspish: “The Court was aware of the position taken in Publication 590 prior to the issuance of the opinion in this case. Since neither party discussed Publication 590 in their briefs, the Court did not address it in its holding. Regardless, respondent’s published guidance is not binding precedent.” Order, at p. 3.

However, IRS is swayed by the collegiates’ and Alvan’s collective tale of woe.

“On March 20, 2014, the IRS released Announcement 2014-15, Application of One-Per-Year Limit on IRA Rollovers. Announcement 2014-15 announced that the IRS will follow the Court’s decision in this case but will not enforce the section 408(d)(3)(B) limitation as applying to all of a taxpayer’s IRAs until January 1, 2015. Respondent’s Notice of Objection agrees to extend the approach set forth in Announcement 2014-15 to petitioners, thus reducing petitioners’ tax liability and the associated 6662 penalty.” Order, at p. 3.

So IRS and Alvan are going to settle. That means the motion for reconsideration is denied as moot, and everybody can roll all their IRAs for the next seven-and-a-half months with a light heart.

Laissez les IRAs roulez!!

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