PLR 200411052: IRS waives IRA rollover deadline after custodian closes early

Plain-English summary

A taxpayer received a traditional IRA distribution and tried to redeposit it on the 58th day. The IRA custodian had closed early for the Labor Day holiday and did not reopen until the 62nd day, after the normal 60 day deadline. The IRS found that the unexpected closure was beyond the taxpayer's reasonable control. It waived the deadline under section 408(d)(3)(I) and allowed 60 days from the ruling letter to make the rollover, provided all other requirements were met. The conclusion calls the distribution “Amount S,” although the facts and request call it “Amount C.”

Ruling snapshot

• Question: Could the taxpayer receive a waiver after an early custodian closing prevented a timely IRA rollover?
• Outcome: Approved; the IRS allowed 60 days from the ruling letter for the rollover.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224 200411052

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Date: DEC 10 2003
Uniform Issue List: 408.03-00

Legend:
Taxpayer =
Custodian A =
IRA B =
Amount C =
Dear :

This letter is in response to a ruling request submitted by you dated September 3, 2003, as supplemented by additional information dated November 5, 2003, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (“Code’).

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

On July 2, 2003, funds totaling Amount C were distributed from IRA B, a traditional individual retirement account (“IRA”) under Code section 408(a) maintained with Custodian A. On August 29, 2003 (the 58th day following the day of receipt) you attempted to redeposit Amount C into IRA B but were prevented from doing so because Custodian A closed early due to the Labor Day holiday. Custodian A did not reopen until September 2, 2003, the 62nd day following the day of receipt.

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

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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 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 60" 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)

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

The information you have presented demonstrates an inability to complete the rollover because of the unexpected closing of Custodian A due to the Labor Day holiday. The failure to deposit Amount C into a Rollover IRA within the 60-day period was beyond the reasonable control of the Taxpayer, 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 S. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to make your rollover. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contributions, these amounts will be considered rollover contributions 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 taxpayer 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

Sincerely yours,

[signature]

Madan Dua, Acting Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437