Bank account error earns a new IRA rollover window

Plain-English summary

A taxpayer took money from an IRA and asked a bank to place it in another IRA, but the bank opened a non-IRA account. The taxpayer discovered the error while preparing a tax return, after the usual 60 day rollover period had expired. The IRS waived that deadline under section 408(d)(3)(I), giving the taxpayer 60 days from the ruling letter to deposit Amount E in a rollover IRA, provided the other rollover rules are met. The facts call the original withdrawal Amount C but do not explain how it relates to the Amount E covered by the waiver. The ruling does not permit a rollover of any required minimum distribution.

Ruling snapshot

• Question: Will the IRS waive the IRA rollover deadline after the bank opened a non-IRA account?
• Outcome: Approved for Amount E, with 60 days from the ruling letter to contribute it to an IRA.
• Key authorities: IRC §§ 408(d)(3)(I) and 401(a)(9); Rev. Proc. 2003-16.

Full text (IRS public release)

200648034

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP - 6 2006

Uniform Issue List: 408.03-00

Legend:
Taxpayer A=

IRA X=

Amount C=
Amount D=
Amount E=
Broker F=
Bank G=
Date 1=

Date 2=

Dear

This is in response to your request dated July 15, , submitted 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”).

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

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Taxpayer A, age __, represents that on Date 1 e received a distribution for Amount C from IRA X. Taxpayer A asserts that h failure to accomplish a rollover within the 60- day period prescribed by section 408(d)(3) was due to a miscommunication or misunderstanding with Bank G which led to Amount C being placed into a non-IRA account.

On Date 1 Taxpayer A withdrew Amount C from IRA X with Broker F with the intention of opening an IRA investment account with Bank G where e could earn a higher rate of return on h investment. On Date 1, Taxpayer A brought the check for Amount C to Bank G and explained to Bank G that the funds were from an IRA h had previously had with Broker F. Due to a miscommunication at Bank G, Amount C was used to establish a non-IRA investment account for Taxpayer A. On December 30, 2004, Taxpayer A withdrew a portion of Amount C, Amount D, from h non-IRA account at Bank G. Taxpayer A intended that Amount D be treated as a taxable IRA distribution. It was not until Taxpayer A began to prepare h 2004 income tax return on Date 2, which was after the 60-day rollover period had expired, when h discovered that although h intended to establish a rollover IRA, Bank G had established a non-IRA account.

Based on the facts and representations, you request that the Service waive the 60-day rollover requirement with respect to the distribution of Amount E.

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)).

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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, 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 and documentation submitted by Taxpayer A is consistent with h assertion that h failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to a miscommunication or misunderstanding with Bank G’s personnel which led to Amount C being placed into a non-IRA account.

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 E. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount E 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 E 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.

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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.

A copy of this letter is being sent to your authorized representative in accordance with 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,

[signature]
for , Manager
Employee Plans Technical Group 4

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