PLR 200649038: Bank's mistaken non-IRA CD transfer supports rollover deadline waiver

Plain-English summary

A 65-year-old IRA owner instructed his bank to move IRA funds into a certificate of deposit within the IRA. The bank instead placed the funds in a non-IRA account and treated the transfer as a distribution. The owner discovered the mistake on receiving Form 1099-R, and the bank documented its error. The IRS waived the 60-day rollover deadline under section 408(d)(3)(I) and allowed 60 days from issuance of the ruling to contribute the distributed amount to a rollover IRA. All other rollover requirements must still be met. The ruling does not determine other tax consequences.

Ruling snapshot

• Question: Does the bank's erroneous transfer into a non-IRA CD justify late rollover relief?
• Outcome: Approved: 60 days from issuance to complete the IRA rollover, subject to all other requirements.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

200649038

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 11 2006
SE:T:EP:RA:T1

Uniform Issue List: 408.03-00

Legend:

Taxpayer A = *****
IRA B = ******* Bank C = ***** Account D = ****** Amount 1 = ******

Dear ****:

This letter is in response to a request for a letter ruling dated March 3, 2006, from your authorized representative, as supplemented by additional correspondence dated June

22, 2006, 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 65, represents that he received a distribution from IRA B totaling Amount 1. 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 mistake made by Bank C.

Taxpayer maintains IRA B with Bank C. On March 24, , Taxpayer A discussed

changing investments within IRA B with a representative of Bank C. The Bank C

representative recommended purchasing a certificate of deposit (“CD”). Taxpayer A

authorized the transfer of Amount 1 to a CD within IRA B. Mistakenly, Amount 1 was

transferred to a CD in non-IRA Account D, and Amount 1 was treated as a distribution

from IRA B. Taxpayer A discovered the mistake when he received his Form 1099-R for from Bank C. Bank C has provided documentation acknowledging the error.

200649038

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

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)(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

200649038

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 the documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish a timely rollover was caused by an error committed by Bank C.

Therefore, pursuant to Code section 408(d)(3)(I), the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount 1 from IRA B. 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.

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

address all correspondence to SE:T:EP:RA:T1.
Sincerely,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
> Deleted Copy of this Letter
> Notice of Intention to Disclose, Notice 437
> Copy of Cover Letter to Authorized Representative