PLR 200332026: IRA rollover deadline waived after funds went to taxable accounts

Plain-English summary

An IRA owner withdrew funds from two IRAs and intended to place them in new IRA accounts. The funds instead went into taxable accounts, and the owner and spouse discovered the error after the 60-day rollover period expired. The IRS found that the failure was beyond their reasonable control and waived the 60-day requirement under § 408(d)(3)(I) for both distributions. A smaller amount later contributed to another IRA could qualify as a rollover if all other § 408(d)(3) requirements were met. The ruling does not say that the entire original withdrawals were rolled over.

Ruling snapshot

• Question: Can the 60-day deadline be waived for the two IRA distributions?
• Outcome: Approved: the deadline was waived, subject to all other rollover requirements.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

200332026

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAY 14 2003

Uniform Issue List: 408.03-00

[illegible]

Legend:
Taxpayer A =
Taxpayer B =
Company C =
Company D=
Individual E =
Amount 1 =
Amount 2 =
Amount 3 =

IRA X =
IRA Y =

IRA Z =

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Dear

This is in response to your letter dated January 30, 2003, as supplemented by correspondence and communications dated March 25, 2003, and April 29, 2003, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (the Code).

The following facts and representations have been submitted in support of the ruling requested:

Taxpayer A is married to Taxpayer B. In early 2002, Taxpayer A maintained two Individual Retirement Arrangements (IRAs), IRA X and IRA Y. In February 2002, Taxpayer A withdrew Amount 1 and Amount 2 from IRA X and IRA Y, respectively, and intended to place such amounts in IRA accounts with Company C. Taxpayer A and Taxpayer B (collectively “Taxpayers”) were unaware that the amounts withdrawn from IRA X and IRA Y were, in fact, placed into taxable, non-IRA accounts with Company C. Taxpayers realized this error in August 2002, when Taxpayer A withdrew amounts from the accounts with Company C. Upon withdrawal from the accounts with Company C, Taxpayer A utilized the services of Individual E of Company D in order to contribute Amount 3, which is less than the sum of Amount 1 and Amount 2, into IRA Z. Individual E represents that Taxpayer A took his minimum required distribution under section 401(a)(9) of the Code for 2002.

The distributions from IRA X and IRA Y of Amount 1 and Amount 2, respectively, were made entirely in cash and the contribution of Amount 3 to IRA Z was also made entirely in cash.

Taxpayers were unaware that the contributions to the accounts with Company C were made to taxable, non-IRA accounts until after the 60-day rollover period had expired.

Taxpayers represent that the distributions of Amount 1 and Amount 2 occurred more than one year after the date of any other distribution from IRA X and IRA Y, respectively, that was rolled over into any IRA, and that no other amount was distributed from any other IRA within these 1-year periods and rolled over into IRA X or IRA Y, respectively.

Based on the above facts and representations, you request that the Service waive the 60-day rollover requirement with respect to the distribution of Amount 1 and Amount 2, because the failure to waive such requirement would be against equity or good conscience.

Section 408(d)(1) of the Code provides that, except as otherwise provided in section 408(d), any amount paid or distributed out of an IRA shall be included in gross income

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by the payee or distributee, as the case may be, in the manner provided under section 72 of the Code.

Section 408(d)(3) of the Code defines, and provides the rules applicable to IRA rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) of the Code does not apply to any amount paid or distributed out of an IRA to the individual for whose benefit the IRA is maintained if—

(i) the entire amount received (including money and any other property) is paid into an IRA for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution; or

(ii) the entire amount received (including money and any other property) is paid into an eligible retirement plan (other than an IRA) for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received, except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross income (determined without regard to section 408(d)(3)).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) does not apply to any amount described in section 408(d)(3)(A)(i) received by an individual from an IRA if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in section 408(d)(3)(A)(i) from an IRA which was not includible in gross income because of the application of section 408(d)(3).

Section 408(d)(3)(D) of the Code provides a similar 60-day rollover period for partial rollovers.

Section 408(d)(3)(I) of the Code provides that the Secretary may waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) of the Code where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement. Only distributions that occurred after December 31, 2001, are eligible for the waiver under section 408(d)(3)(I) of the Code.

Rev. Proc. 2003-16, 2003-4 I.R.B. 359, provides that in determining whether to grant a

waiver of the 60-day rollover requirement pursuant to section 408(d)(3)(I), the Service will consider all relevant facts and circumstances, including: (1) errors committed by a financial institution; (2) inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error; (3) the use of the amount distributed (for example, in the case of payment by check,

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whether the check was cashed); and (4) the time elapsed since the distribution occurred.

The information presented by Taxpayers demonstrates hardship, and indicates that the Taxpayers could not reasonably satisfy the requirement that Amount 1 and Amount 2 be deposited in an IRA within 60 days of the distributions from IRA X and IRA Y, respectively. The failure to deposit Amount 1 and Amount 2 into one or more IRAs within the 60-day period was beyond the reasonable control of Taxpayers, and the failure to waive the 60-day requirement would be against equity or good conscience.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount 1 and Amount 2. Provided all other requirements of section 408(d)(3) of the Code are satisfied, except the 60-day requirement, the contribution of Amount 3 to IRA Z will be considered a valid rollover contribution within the meaning of section 408(d)(3) of the Code.

No opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the Code or regulations which may be applicable thereto.

This letter is directed only to the taxpayers who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

If you wish to inquire about this ruling, please contact D. at Please address all correspondence to T:EP:RA:T4.

Sincerely yours,

Alan C. Pipkin
Manager, Technical Group 4
Employee Plans

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose