PLR 200416015: Waiver permits late rollover of excess IRA distribution

Plain-English summary

An IRA custodian distributed more than a taxpayer requested to meet a required minimum distribution. The taxpayer missed the 60-day rollover deadline after failing to notice the error while dealing with family hardships. The IRS waived the deadline under § 408(d)(3)(I), citing the custodian's clerical error and the taxpayer's circumstances. The taxpayer received 60 days from the ruling letter to deposit the excess amount in cash into one or more IRAs. The rollover treatment still depends on meeting the other statutory requirements.

Ruling snapshot

• Question: Could the taxpayer roll over the excess IRA distribution after the 60-day deadline?
• Outcome: Approved, with 60 days from the letter to make the contribution.
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

200416015

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

Uniform Issue List: 408.03-00

JAN 22 2004

[illegible handwritten notation]

Legend:

Taxpayer A =
Taxpayer B =
Company C =
Document D =
Amount E =
Amount F =
Amount G =
Document H =
IRA X =

Dear

This is in response to a ruling request submitted by you on *, **, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code. The following facts and representations have been submitted in support of your request.

You are both ** years old. Taxpayer A maintained an individual retirement account, IRA X, with Company C. On * , **, Taxpayer A signed Document D which provided for a distribution of funds from IRA X. Company C had indicated to Taxpayer A that a distribution of Amount E was necessary in order for Taxpayer A to satisfy the requirements of the law relating to minimum distributions from accounts such as an

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individual retirement account (IRA). Taxpayer A completed Document D and indicated to Company C in the proper place in the document that an amount equal to Amount E should be distributed out of IRA X for the year * to satisfy the minimum distribution requirements. However, due to a clerical error, a misreading by an employee of Company C, of the amount indicated in Document D, Amount F was inadvertently distributed from IRA X for the year *. During this time the Taxpayers were called upon to travel often in harsh winter weather some distance away across the state in order to assist their son and grandchildren following their son's divorce and relocation. Taxpayer A and Taxpayer B were extremely busy and occupied with difficult and confusing family circumstances beyond their control and did not notice the discrepancy and contact Company C until the 60-day rollover period had elapsed. 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 G from IRA X 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 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 or 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 or 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 of the Treasury may waive the 60-day requirement under sections 408(d)(3)(A) and (D) of the Code where the

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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.

Revenue Procedure 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 4089(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, whether the check was cashed); and (4) the time elapsed since the distribution occurred.

The information presented by Taxpayer A demonstrates the mistake or error on the part of an employee of Company C that resulted in the transaction not being carried out in accordance with Taxpayer A’s intent, and, in addition, the age of the Taxpayers and confusion surrounding the family hardships and burdens they encountered during the time of the transaction. These facts and circumstances indicate that Taxpayer A could not reasonably satisfy the requirement that Amount G be deposited in an IRA within 60 days of the distribution from his IRA, and the failure to waive the 60-day requirement would be against equity and 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 G. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount G, in cash, into one or more IRAs. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day rollover requirement, are met with respect to such contribution, this amount will be considered a 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 that may be applicable hereto.

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

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If you have any questions regarding this ruling, you may contact
_ at

Sincerely yours,

Donzell Littlejohn, Manager
Employee Plans Technical Group 4

Enclosures:

Notice of Intention to Disclose
Deleted copy of letter