PLR 200717027: IRA rollover deadline waived after deposit into wrong account

Plain-English summary

A taxpayer intended to move money from one IRA to another, but a financial institution deposited her check into a taxable account instead. She learned of the mistake after the 60-day rollover period expired. The IRS accepted that the error resulted from miscommunication with the institution and waived the deadline under section 408(d)(3)(I). It gave her 60 days from the ruling date to contribute the eligible amount to an IRA, provided the other rollover requirements were met. The ruling excluded required minimum distributions for 2005 and 2006.

Ruling snapshot

• Question: Could the taxpayer roll over the eligible IRA funds after the institution put them in a taxable account?
• Outcome: Approved; a 60-day period from the letter date was granted to contribute Amount D.
• Key authorities: IRC §§ 408(d)(3)(I), 408(d)(3)(E), 401(a)(9); Rev. Proc. 2003-16.

Full text (IRS public release)

200717027

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

TAX-EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
JAN 30 2007
Uniform Issue List: 408.03-00
Legend:
Taxpayer A =
IRA X =

Financial Institution M =

Financial Institution N =

Amount C =

Amount D =

Date 1 =

Dear

This is in response to letters dated August 10, 2006, and December 8, 2006, submitted on your behalf 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.

Taxpayer A, age 74, represents that she received a distribution from IRA X totaling Amount C. Taxpayer A asserts that her failure to accomplish a rollover of Amount D (Amount C minus the required minimum distribution for year 2004) within the 60-day period prescribed by section 408(d)(3) was due to miscommunication and misunderstanding by a representative of Financial

200717027
Page 2
Institution M resulting in Amount D being deposited into a non-IRA account. Taxpayer A represents that Amount D has not been used for any other purpose.

; .
Taxpayer A met with a representative of Financial Institution M a few days after receiving a Date 1 distribution from IRA X which she had maintained with’ Financial Institution N in Amount C. Taxpayer A had established a relationship with her broker at Financial Institution M and maintained an IRA account and a

taxable account at Financial Institution M. Taxpayer A intended to move IRA X to her IRA at Financial Institution M. However, a representative of Financial Institution M mistakenly deposited Taxpayer A’s check into the taxable account rather than the IRA account. Taxpayer A was not aware that a deposit to non-IRA account was established until she received a 1099 Form after the expiration of the 60-day period.

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 C, contained in section 408(d)(3) of the Code (“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)(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)(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

Page 3

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 a failure to accomplish a rollover within the 60- day period prescribed by section 408(d)(3) was due to miscommunication and misunderstanding by a representative of Financial Institution M resulting in Amount D being deposited into a non-IRA account. Taxpayer A represents that Amount D has not been used for any other purpose.

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 D from IRA X. Pursuant to this ruling letter, Taxpayer A is granted a period of 60 days measured from the date of the issuance of this letter ruling to make a rollover contribution of an amount equal to Amount D to an IRA (or IRAs) described in Code section 408(a). Provided all other requirements of Code section 408(d)(3), except the 60-day requirement, are met with respect to

Page 4

200717027
such IRA contribution, the contribution will be considered a rollover contribution

within the meaning of Code section 408(d)(3).

Please note that, pursuant to code section 408(d)(3)(E), this ruling letter does not authorize the rollover of the Code section 401(a)(9) minimum required

distributions for the calendar years 2005 and 2006.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative.

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

Sincerely yours,

Frances V. Sloan, Manager
Employee Plans Technical Group 3

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