PLR 200550040: Deposit into a regular account justified an IRA rollover deadline waiver

Plain-English summary

An IRA owner asked the IRS to waive the 60 day rollover deadline after money intended for a new IRA was deposited in a regular bank account. He said he instructed the receiving bank to put the money in a rollover IRA and discovered the error while preparing his tax returns. The bank confirmed that no money had been withdrawn, and account statements showed that the funds remained in the regular account. The IRS waived the deadline under § 408(d)(3)(I) and gave him 60 days from the ruling date to contribute the amount to an IRA. The ruling requires the other IRA rollover rules to be met and does not authorize a rollover of any required distribution.

Ruling snapshot

• Question: Could the IRA owner receive a waiver after the receiving bank placed the intended rollover in a regular account?
• Outcome: Approved. The IRS allowed 60 days from the ruling date to contribute the funds to an IRA, subject to other rollover requirements.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

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

200550040

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 20 2005
[illegible handwritten notation]
U.I.L. 408.03-00

[redacted address]

Legend:

Taxpayer A = [redacted]
IRA X = [redacted]
Bank B = [redacted]
Bank C = [redacted]
Amount D = [redacted]
Individual M = [redacted]
Account K = [redacted]

Dear [redacted]:

This is in response to your letter dated April 22, 2005, as supplemented by correspondence dated August 4, 2005, and August 16, 2005, submitted on your behalf by your authorized representative, in which you request a waiver of the 60 day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (the “Code”).

[redacted] 2 200550040

The following facts and representations have been submitted under penalties of perjury in support of your request.

Taxpayer A maintained an individual retirement arrangement, IRA X, with Bank B. IRA X was invested in a certificate of deposit that matured on [redacted]. Taxpayer A decided to rollover Amount D to an IRA with Bank C when the certificate of deposit matured rather than renew the time deposit with Bank B. Documentation submitted with this request shows that on [redacted] Bank B issued a check to Taxpayer A made payable to Bank C in the amount of Amount D. Documentation submitted with this request further shows that on the same day, Taxpayer A established Account K at Bank C. The Bank C account statement for Account K shows that a deposit in the amount of Amount D was

made on [redacted].

Taxpayer A asserts that he instructed Bank C personnel to place Amount D into a rollover IRA and discovered that Amount D had not been rolled over to an IRA as he desired as he was preparing his [redacted] tax returns. Account K is a non- retirement account. In a letter to Taxpayer A dated August 12, [redacted] from Bank C, it verified that Taxpayer A deposited Amount D into Account K and also stated that no funds have been withdrawn from Account K. In addition, Taxpayer A states that he has never used any of the funds in Account K and submitted account statements for Account K that also shows that Amount D remains deposited in that account.

Based upon the foregoing facts and representations, you request that the Service waive the 60 day rollover requirement with respect to the distribution of Amount D from IRA X.

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)(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 received the payment or distribution; or

[redacted] 3 200550040

(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 in 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 included 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 and good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement. Only distributions that occur 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, or hospitalization, incarceration, restrictions imposed by a foreign country or postal error; (3) the use of 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 and documentation submitted by Taxpayer A is consistent with his assertion that he failed to complete a rollover to an IRA within the 60-day rollover period because Amount D was deposited in a regular account and not in a rollover account as he intended.

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 D from IRA X. Taxpayer A is granted a period of 60 days from the date of this

[redacted] 4 200550040

ruling to contribute Amount D to an IRA. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contribution, Amount D 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 transactions described herein under the provisions of any other section of either the Code or regulations, which may be applicable thereto.

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

This ruling does not authorize the rollover of amounts that are required to be distributed to Taxpayer A by section 401(a)(9) of the Code.

If you have any questions concerning this ruling, please contact
[redacted].

Sincerely yours,

[signature]

Joyce E. Floyd, Manager
Employee Plans Technical Group 2
Enclosures:
Deleted copy of letter ruling
Notice 437