PLR 200625039: IRA certificate mix-up gets late rollover relief

Plain-English summary

A taxpayer moved money from two maturing IRA certificates of deposit into new certificates at other banks. He believed the new certificates were IRAs, but a misunderstanding with the banks about the accounts caused him to miss the IRA rollover deadline. The IRS waived the 60-day deadline because the documentation supported his account and he had not used the funds for another purpose. He has 60 days from the ruling to contribute the eligible amounts to a rollover IRA. The ruling does not permit a rollover of any amount that had to be distributed under the required distribution rules.

Ruling snapshot

• Question: Can a taxpayer complete late IRA rollovers after a misunderstanding about the status of replacement certificates of deposit?
• Outcome: Approved, with 60 days to contribute the eligible amounts to a rollover IRA.
• Key authorities: IRC §§ 408(d)(3)(I), 401(a)(9); Rev. Proc. 2003-16.

Full text (IRS public release)

Department of the Treasury
200625039
Internal Revenue Service
Washington, D.C. 20224

MAR 2 7 2006

Uniform Issue List: 408.03-00

SE:T:EP:RA:T3

Legend:

Taxpayer A =

IRA X =

IRA Y =

Amount A =

Amount B =

Amount C =

Amount D =

Bank K =

Bank M =

Bank P=

Bank S =

Dear :

200625039

Page 2 '

This is in response to your request dated December 13, 2005, and as supplemented by letter dated February 13, 2006, 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 79, represents that he received distributions from IRAs Y and X of Amounts A and B respectively. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to a misunderstanding with Banks M and S as to the nature of the certificates of deposit (CDs) used in his intended rollover. Taxpayer A further represents that the funds in question have not been used for any other purpose.

Taxpayer A had his retirement assets in two IRA CDs at two different financial institutions. IRA X at Bank K reported a balance of Amount A at maturity in year 2004. IRA Y at Bank P reported a balance of Amount B at maturity in year 2004. Taxpayer A intended to roll over the matured IRA CD Amounts A and B into new IRA CDs within the 60-day period with the hope that the new IRA CD interest rates would improve investment performance. Amount A and Amount D (Amount B rounded down by Amount C) were deposited into new CDs at Bank M and Bank S, respectively, approximately one week after Taxpayer A received the distributions from the closed CD accounts at Banks K and P. Taxpayer A asserts that he at all times believed the new CDs were IRAs.

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 Amounts A and D 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

200625039

Page 3

(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 his assertion that his failure to accomplish a timely rollover was caused by a misunderstanding with Banks M and S as to the nature of the certificates of deposit (CDs) used in his intended rollover. Taxpayer A further represents that the funds in question have not been used for any other purpose.

200625039

Page 4

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 Amounts A and D from IRAs X and Y. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amounts A and D into a Rollover IRA, less amounts described below. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contribution, Amounts A and D will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

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