Need to Knows about Rollover IRAs and PLRs

This week’s Slott Report Mailbag looks into rollover IRAs and PLRs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.

Question: I have a question about when the 365-day waiting period begins for the once-per-year 60-day rollover for IRAs. Does the 365-day waiting period begin with the distribution or with the replacement of the funds in an IRA?

Answer: The once-per-year rollover rule says that an IRA owner may only roll over one IRA distribution in a 365-day period. The details matter here! When does the clock start? The 365-day period begins when the IRA distribution is received, not when the funds are rolled over. Received is not when the funds leave the IRA, it is when the IRA owner has actual receipt of the funds.

Question: Hi Ed, I submitted a PLR request to get approval for rollover treatment for an IRA that was payable to an estate, which poured-over to a trust, which trust is being terminated by the court and distributed to the surviving spouse. IRS is insisting the user fee is $28,300. I think it should be $10,000 (which is bad enough) under Rev Proc 2016-8 Section 6.01(4). Any insights? 

Answer: Over the past two years IRS has quietly changed the fee structure for IRA private letter rulings (PLRs) – dramatically. Ruling requests for spousal rollovers through a trust or an estate are now subject to the standard fee of $28,300, up from $10,000. But there are fee reductions for this fee, when taxpayers qualify for reduced income fees. If income is less than $250,000, the fee is reduced to $2,200. If income is less than $1,000,000, the fee is reduced to $6,500. Only clients whose income is $1,000,000 or more will pay the full fee of $28,300.