PLR 200610030: IRA rollover deadline waived after funds entered ordinary account

Plain-English summary

A taxpayer withdrew money from an IRA intending to move it to another IRA, but deposited it into an ordinary account at a different financial institution. She believed the deposit completed the rollover and said she had not used the money for another purpose. The IRS found the documentation consistent with a misunderstanding or miscommunication with the receiving institution. It waived the 60 day rollover deadline and gave her 60 days from the ruling to contribute the amount to a rollover IRA. The contribution would count as a rollover only if the other section 408(d)(3) requirements were met.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60 day IRA rollover deadline?
• Outcome: Approved a waiver and 60 days from the ruling to make the rollover contribution.
• 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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 14 2005
200610030

Uniform Issue List: 408.03-00

Legend:

Taxpayer A =

Financial Institution B =

Financial Institution C =

IRA X =

Account Y =

Amount 1 =

Dear [redacted]:

This letter is in response to a request for a letter ruling dated May 2, 2005, as supplemented by additional correspondence dated July 13, 2005, from 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

("Code").

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested.

Taxpayer A, age 64, represents that she received a distribution from IRA X totaling Amount 1. Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to miscommunication or misunderstanding with Financial Institution C which led to Amount 1 being placed into a non-IRA account. Taxpayer A further represents that Amount 1 has not been used for any other purpose.

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Taxpayer A maintained IRA X, an Individual Retirement Account (“IRA”) under Code section 408(a), with Financial Institution B. The assets of IRA X were invested in certificates of deposit (“CD”). Seeking more favorable interest rates, in [redacted] Taxpayer A represents that she contacted Financial Institution B with the intention of withdrawing the funds in IRA X and depositing the proceeds into an IRA with Financial Institution C. On [redacted] Taxpayer A was issued a check in the amount of Amount 1, which represented the proceeds of IRA X. On [redacted], Taxpayer A opened Account Y, a non-IRA account, with Financial Institution C and deposited Amount 1 into Account Y. Taxpayer A represents that she believed the deposit of Amount 1 into Account Y completed a valid rollover. Although Taxpayer A did not discuss IRAs with the employee of Financial Institution C, the check stub indicated the proceeds were from an IRA. Taxpayer A became aware of the mistake in [redacted], during the preparation of her [redacted] tax return.

Based on the above facts and representations, with respect to the distribution of Amount 1, you request a ruling that the Internal Revenue Service waive the 60 day rollover requirement contained in section 408(d)(3) of the Code.

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

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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 (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 and documentation submitted by Taxpayer A is consistent with her assertion that her failure to accomplish a timely rollover was due to miscommunication or misunderstanding with Financial Institution C.

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 1 from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 1 into a Rollover 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 1 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 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 ruling has been sent to your authorized representative pursuant to 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,

Carlton A. Watkins

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose, Notice 437

CC: