PLR 200727027: IRA rollover deadline waived after advisor's deposit error

Plain-English summary

An IRA owner intended to roll a distribution into another IRA, but a financial advisor's error led to its deposit in an account that was not an IRA. The owner, who was legally blind, discovered the mistake after the 60-day rollover deadline. The IRS waived that deadline and gave the owner 60 days from the ruling date to contribute the amount to a rollover IRA, provided the other rollover requirements were met. The waiver did not permit a rollover of any amount that had to be distributed under the required minimum distribution rules.

Ruling snapshot

• Question: Could the owner complete an IRA rollover after the advisor's deposit error caused the deadline to pass?
• Outcome: Approved a 60-day waiver subject to other rollover requirements.
• Key authorities: IRC §§ 408(d)(3)(I), 401(a)(9); Rev. Proc. 2003-16

Full text (IRS public release)

200727027

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

APR 13 2007

Legend:

Institution A =
Institution B =
Individual D =
Amount M =
Date M =
Date N =
Date P =
Date R =

IRA X =
IRA Y =

Account Z =

Dear

This is in response to your request dated January 26, 2007, 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”). Correspondence dated March 23, 2007, supplemented the request.

200727027
Page 2

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

You are years old and maintained IRA X with Institution A. You assert that your failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to errors committed by your financial advisor which resulted in Amount M being place in a non-IRA account, where it still remains.

On Date P, 2004, you requested a distribution of Amount M from IRA X with the intent of rolling Amount M into IRA Y, a rollover IRA that you had previously established with Institution B. You received Amount M approximately 10-days later and on Date N, 2004, you wrote a check for Amount M which you intended to deposit into IRA Y. Individual D, your financial advisor, sent your check to Institution B. However, individual D, in an affidavit dated Date R, 2007, and other documentation submitted by him indicated that Amount M was erroneously deposited in Account Z, a non-IRA account, and such error occurred through no fault of your own. You were unable to determine the error until after the 60-day rollover period had expired due, in part, to the fact that you are legally blind.

Based on the facts and representations, you request a ruling that the Internal Revenue Service waive the 60-day rollover requirement, with respect to Amount 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

(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

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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 you presented, and the documentation submitted by you, demonstrate that your financial advisor erred by requesting that Institution A deposit Amount M in Account Z, a non-IRA.

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 M from IRA X. You are granted a period of 60 days from the issuance of this ruling letter to contribute Amount M, less amounts described below, 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 M 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 (the required minimum distribution).

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.

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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 (ID ) at ( ) Please address all correspondence to SE:T:EP:RA:T:3

Sincerely yours,

Frances V. Sloan, Manager,
Employee Plans Technical Group 3

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