PLR 200507018: IRA custodian's account transfer gets a rollover deadline waiver

Plain-English summary

An IRA owner moved money from a matured certificate of deposit in an IRA to a money market account at the same custodian. The new account was not an IRA, but the owner said the move was not recognized as a distribution of IRA funds and the custodian had not advised of the 60-day rollover deadline. The money remained in the non-IRA account. The IRS waived the deadline under IRC § 408(d)(3)(I) and gave the owner 60 days from the ruling letter to transfer the amount to an IRA. The ruling required satisfaction of the other rollover requirements.

Ruling snapshot

• Question: Could the owner roll the distribution back into an IRA after the 60-day deadline?
• Outcome: Approved: a 60-day period from the ruling letter to transfer the amount.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

200507018

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 22 2004
Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:
Taxpayer =
Custodian A =
IRA B =
Account C =
Amount D =

Dear :

This letter is in response to a request for a letter ruling dated June 16, 2004, as supplemented by additional information dated September 22, 2004, in which you have applied for 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:

The Taxpayer is 82 years of age and maintained IRA B with Custodian A. The Taxpayer had a thirty month certificate of deposit (“CD”) in IRA B which matured on July 9, 2003. The Taxpayer wanted to change investments. On August 4, 2003, the Taxpayer

transferred Amount D to Account C, a non-IRA money market account also sponsored by Custodian A. At the time of the transfer, the Taxpayer was not aware that the funds were

200507018
2

being distributed from [redacted] IRA and was not advised of the 60-day rollover requirement by Custodian A. To date, these funds have remained in the non-IRA account sponsored by Custodian A.

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 D because the failure to waive such requirement would be against equity or good conscience.

Code section 408(d)(1) 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.

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

Code section 408(d)(3)(A) provides that section 408(d)(1) 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)).

Code section 408(d)(3)(B) 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).

Code section 408(d)(3)(D) provides a similar 60-day rollover period for partial rollovers. Code section 408(d)(3)(I) provides that the Secretary may waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) 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

200507018
3

under section 408(d)(3)(I).

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 Code 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.

Upon the maturity of your CD investment, you wanted to change investments and transferred Amount D to a non-IRA money market account where it remains. At the time of the transfer, you were unaware that the funds were invested in IRA B and was not advised of the 60-day rollover requirement by Custodian A. Therefore, pursuant to Code section 408(d)(3)(I), the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount D. You are granted a period of 60 days from the issuance of this ruling letter to transfer Amount D to an IRA. Provided all other requirements of section 408(d)(3), except the 60-day requirement, are met with respect to such contributions, this amount will be considered rollover contributions within the meaning of section 408(d)(3).

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. Code section 6110(k)(3) provides that it may not be used or cited as precedent.

If you wish to inquire about this ruling, please contact [redacted], [redacted] at [redacted].

Sincerely yours,

(signed) Carlton A. Watkins
Manager
Employee Plans Technical Group 1

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