PLR 200430036: Broker's incorrect 90-day advice justifies IRA rollover waiver

Plain-English summary

An IRA owner withdrew funds intending to return them to the IRA without tax. A broker's representative repeatedly said the rollover deadline was 90 days, although the law allowed 60. The funds were returned after the actual deadline. The IRS found the representative's error was beyond the owner's reasonable control and waived the 60-day requirement under section 408(d)(3)(I), subject to the other rollover rules. The letter describes the distribution as Amount B but calls the redeposited amount Amount C in its closing ruling.

Ruling snapshot

• Question: Will the IRS waive the IRA rollover deadline after a broker repeatedly gave an incorrect 90-day deadline?
• Outcome: Approved, subject to the other rollover requirements.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

200430036

Uniform Issue List: 408.03-00

Legend:
Taxpayer A=
Amount B=

IRA C=

Broker D=

Dear

This is in response to your request of , through your authorized representative, for 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:

You are a -year old . On , you instructed Broker D to transfer Amount B from IRA C to your personal account and purchase stocks assets. You intended to deposit Amount B back into IRA C within the time permitted by law to avoid receiving a taxable distribution. Broker D’s representative, whom you dealt with for many years, told you incorrectly that the time period for making a tax free rollover was 90 days instead of 60 days as required by Code section 408(d)(3)(A)(i).

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You checked with Broker D's representative on two later occasions prior to the expiration of the 60-day period. Each time, he told you the time period for making a tax free rollover was 90 days. On , Broker D re-deposited Amount B from your personal account to IRA C.

After the 60-day period had expired, during late Broker D's representative informed you the information he had given you about a 90-day rollover time period was incorrect.

You represent that no other amount was distributed from IRA C within the one year period since the original distribution.

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 B.

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

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

The information you presented demonstrates that you relied on erroneous advice from Broker D's representative, advice that he reconfirmed to you on several occasions. The failure to redeposit Amount B into IRA C within the 60-day period was due to the representative's error and beyond your reasonable control.

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 B. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contributions, Amount C re-deposited in IRA C on ,

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.

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A copy of this letter has been sent to your authorized representative in accordance with a power of attorney on file in this office.

If you wish to inquire about this ruling, please contact , at
. Please address all correspondence to
.

Sincerely yours,
Donzell Littlejohn

, Manager
Employee Plans Technical Group 4

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