PLR 200621021: Incorrect bank advice leads to an IRA rollover waiver

Plain-English summary

An IRA owner withdrew money and asked her financial institution how long she had to put it back. A customer service agent incorrectly told her she had 90 days from cashing the check, and she redeposited the full amount within that period but after the usual 60-day deadline. The IRS found that her actions matched her reliance on the incorrect advice. Under IRC § 408(d)(3)(I), it waived the deadline and treated her May 11, 2004 deposit as a rollover contribution.

Ruling snapshot

• Question: Could the IRA owner receive a waiver of the 60-day rollover deadline after relying on incorrect information from her financial institution?
• Outcome: Approved; the IRS waived the deadline for this distribution.
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

Department of Treasury
Internal Revenue Service
Washington, D.C. 20224

MAR - 2 2006

Uniform Issue List: 408.03-00

Legend:

Taxpayer A =

IRA X =

Amount A =

Customer Service Agent B =

Financial Institution C =

Dear

This is in response to your request dated April 15, 2005, 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”).

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

Taxpayer A, age 35, represents that she received a distribution from IRA X totaling Amount A. Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to erroneous information provided by Customer Service Agent B of Financial Institution C in which Taxpayer A maintained her IRA X.

Taxpayer A withdrew Amount A from IRA X on January 23, 2004, and cashed the withdrawal check on February 12, 2004. At the time of withdrawal, Taxpayer A asked to speak to the Retirement Services Department and specifically asked about the time frame for redepositing Amount A. Customer Service Agent B erroneously informed Taxpayer A that she would have 90 days from the date she cashed the withdrawal check, not from the date of distribution, to redeposit Amount A as a rollover contribution to IRA X. Relying on this information, on May 11, 2004, Taxpayer A redeposited Amount A into IRA X, which was within 90 days of the February 12 date. During preparation of her year federal income taxes, Taxpayer A was informed that she had taken a premature IRA distribution because the rollover was not completed timely.

Taxpayer A contacted Financial Institution C about the erroneous information. Financial Institution C explained in writing that Agent B was not a member of its specialized Retirement Services Department.

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

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.

Section 408(d)(3)(E) of the Code provides that the rollover provisions of section 408(d) do not apply to any amount required to be distributed under section 408(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.

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 caused by the erroneous information given her by Customer Service Agent B of Financial Institution C. Furthermore, Taxpayer A took steps to roll over Amount A which were consistent with her belief that the appropriate period was 90 days.

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 to Taxpayer A of Amount A from IRA X. Therefore the Service will consider the May 11, 2004, rollover contribution to IRA X as 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.

If you wish to inquire about this ruling, please contact , I.D. # , at . Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

Frances V. Sloan, Manager
Employee Plans Technical Group 3

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