PLR 200429012: Waiver for IRA rollover mistakenly put in savings account

Plain-English summary

A taxpayer instructed a bank to put part of an IRA withdrawal into a new IRA. The bank instead placed it in an existing savings account, though the taxpayer believed the rollover had been completed and reported it that way on his tax return. He left the money unused and discovered the mistake after the 60-day deadline. The IRS waived the deadline under § 408(d)(3)(I) because the bank's error prevented a timely rollover. He had 60 days from the ruling letter to contribute the amount to an IRA, subject to the other rollover rules; required minimum distributions were excluded.

Ruling snapshot

• Question: Could the taxpayer receive a 60-day rollover waiver after the bank deposited his money into a savings account?
• Outcome: Approved; 60 days from the letter to complete an eligible rollover.
• Key authorities: IRC §§ 408(d)(3)(I), 408(d)(3)(E); Rev. Proc. 2003-16.

Full text (IRS public release)

200429012

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
APR 22 2004

Uniform Issue List: 408.03-00
SE:T:EP:RA:T3

Legend:

Taxpayer A =

Amount D =
Amount E =
Bank B =
Bank L =

In letters dated January 10, 2004, and April 2, 2004, you requested 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 under penalty of perjury in support of the ruling requested:

Taxpayer A withdrew funds from his Individual Retirement Account (IRA) with Bank B and deposited during calendar year , a portion of these funds, approximately Amount D, with Bank L. Taxpayer A gave instructions to Bank L that Amount D be placed in an IRA. Instead Bank L placed the funds in an existing non-IRA account that already contained Amount E.

Based on his conversation with employees of Bank L, Taxpayer A believed that he had properly rolled over the distribution from his existing IRA into a new IRA at Bank L and

he filed his federal income tax return (Form 1040) accordingly. Taxpayer A’s calendar

year Form 1040 indicates at line 15a that Amount D had been rolled over.

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In late August of Taxpayer A discovered that Amount D had not been rolled over into an IRA but had instead been placed in a premium savings account. He consulted with Bank L and the branch manager refused to correct the error.

At all times Taxpayer A has treated Amount D as though it was in an IRA account and has not used Amount D for any reason.

Based on the facts and representations, you request that the Internal Revenue Service waive the 60-day rollover requirement with respect to the distribution of Amount D because the failure to waive such requirement would be a hardship and 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 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.

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Code section 408(a)(6) provides, in general, that rules similar to the rules of section 401(a)(9) shall apply to the distribution of the entire interest of an individual for whose benefit the trust is maintained.

Code section 408(d)(3)(E) provides that paragraph 408(d)(3) shall not apply to any amount to the extent such amount is required to be distributed under subsection (a)(6).

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.

Revenue Procedure 2003-16, 2003-4 I.R.B. 359, (January 27, 2003) 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, whether the check was cashed); and (4) the time elapsed since the distribution occurred.

The information presented by Taxpayer A demonstrates an error on the part of Bank L. Taxpayer A believed that Bank L had effected a rollover of Amount D from Taxpayer A’s initial IRA held with Bank B. Instead Bank L placed Amount D into an existing savings account instead of an IRA. The transaction resulted in Taxpayer A's failing to effect a rollover within 60 days.

Therefore, pursuant to Code section 408(d)(3)(I), the Service hereby waives the 60-day rollover requirement with respect to the withdrawal of Amount D. Pursuant to this ruling letter, Taxpayer A is granted a period of 60 days measured from the date of the issuance of this letter ruling to make a rollover contribution of an amount equal to Amount D, except as noted below, to another IRA (or IRAs) described in Code section 408(a). Provided all other requirements of Code section 408(d)(3), except the 60-day requirement, are met with respect to such IRA contribution, the contribution will be considered a rollover contribution within the meaning of Code section 408(d)(3).

Please note that, pursuant to Code section 408(d)(3)(E), this ruling letter does not authorize the roll over of any amounts required to be distributed.

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.

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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

I.D.
at

Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

Frances V. Sloan, Manager
Employee Plans Technical Group 3

Enclosures:

Deleted copy of letter ruling
Notice of Intention to Disclose