PLR 200547023: IRA owner receives waiver after misunderstanding rollover deadline

Plain-English summary

An IRA owner withdrew money and believed she had 90 days to put it back, based on a prior transaction and a conversation with an employee of the IRA custodian. She tried to redeposit part of the withdrawal about 85 days later, but the custodian refused it because the normal deadline was 60 days. The IRS waived that deadline for the portion she tried to roll over and gave her 60 days from the ruling date to contribute up to that amount to an IRA. The waiver was subject to the other rollover rules and did not cover any required minimum distribution.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60 day IRA rollover deadline for the attempted partial redeposit?
• Outcome: Approved for an amount up to the attempted redeposit, subject to the other rollover requirements.
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

200547023

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
SEP - 1 2005

Uniform Issue List: 408.03-00

Legend:

SE:T:EP:RA:T3

Taxpayer A =

Amount D =
Amount E =

IRA X =

Company A=
Bank B =
Date 1 =

Date 2 =

Dear [redacted]:

In letters dated , , and , you, through your
authorized representative, 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 maintained an individual retirement account (“IRA”), IRA X, with Company A. On or about Date 1, 2004, Taxpayer A withdrew Amount D from her IRA X and deposited said Amount D into a checking account with Bank B. Taxpayer A, through her authorized representative, asserts that, based on her experience with a prior distribution/rollover transaction, she believed she had 90 days within which to roll over or redeposit Amount D into an IRA. Taxpayer A ‘s authorized representative also asserts that, at the time of withdrawal, Taxpayer A advised an employee of Company A that she would be redepositing said Amount D into the IRA within 90 days to avoid any penalties, and that the employee did not give her any contradictory information which confirmed her belief that the rollover period was 90 and not 60 days.

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On or about Date 2, 2004, which was approximately 85 days after Date 1, 2004, Taxpayer A attempted to roll over Amount E, a portion of Amount D, into her IRA with Company A. Company A refused to accept said contribution since over 60 days had expired since Taxpayer A had received her IRA X distribution.

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 E because the failure to waive such requirement would be a hardship and against equity

or good conscience.

With respect to your ruling request, 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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Section 408(d)(3)(E) of the Code provides, in general, that paragraph 408(d) does not apply to any amount 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 a failure on the part of Taxpayer A to accomplish her intended rollover because of a misunderstanding as to the proper time-frame within which a tax-deferred rollover is required to be completed which erroneous belief was based on a prior experience and a conversation she had with a representative of Company A. Further, Taxpayer A acted in conformance with her belief and attempted to redeposit Amount E into her IRA within 90 days of the date of distribution but Company A, which held Taxpayer A’s IRA X, refused to accept her rollover since the requisite 60-day rollover period had expired.

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 E. 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 not to exceed Amount E to an 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).

Note that, pursuant to code section 408(d)(3)(E), this letter ruling does not authorize the rollover of any amounts required to be distributed in accordance with Code section 401(a)(9) made applicable to IRAs pursuant to Code section 408(a)(6) (if any).

No opinion is expressed as to the tax treatment of the transaction described herein

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

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

Sincerely yours,

Frances V. Sloan, Manager
Employee Plans Technical Group 3

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