PLR 200752044: IRS waives rollover deadline after bank deposited IRA transfer into wrong account

Plain-English summary

A woman instructed two financial institutions to transfer funds from one IRA to another. The sending institution confirmed an IRA wire transfer, but the receiving institution put the funds into an account that was not an IRA. She learned of the error months later while preparing her tax return and had not used the funds for another purpose. The IRS found that the institutions' failure to follow her instructions justified waiving the 60-day rollover deadline under § 408(d)(3)(I). It gave her 60 days from the ruling to contribute an equal amount to one or more IRAs, subject to the other rollover requirements.

Ruling snapshot

• Question: Could the taxpayer complete a late IRA rollover after a receiving institution deposited the funds into the wrong account?
• Outcome: Approved: the IRS waived the deadline and allowed a new 60-day contribution period.
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
200752044

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
OCT - 1 2007
T:EP:RA:T3

Uniform Issue List: 408.03-00

Legend:

Taxpayer A =

IRA X =

Financial Institution M =
Financial Institution B =
Amount B =

Dear

This is in response to your request dated March 29, 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”).

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

Taxpayer A, who is under age 70 1/2, represents that she authorized a direct transfer of Amount B to accomplish a rollover of IRA X, which Taxpayer A maintained at Financial Institution M, to an IRA account at Financial Institution B. Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to the failure of representatives of Financial Institutions M and B to follow her instructions.

Taxpayer A asserts that she intended to accomplish a rollover of IRA X by way of a direct transfer of Amount B from IRA X at Financial Institution M to Financial Institution B, in order to improve her investment return. Prior to September 5, 2006, Taxpayer A asserts that she talked in person and communicated her intent to accomplish a rollover with representatives of both Financial Institution M and B. Taxpayer A subsequently received a transaction notification from Financial Institution M indicating that an IRA rollover wire transfer had been completed as well as a notification from Financial Institution B that the funds had been received. It was not until February 2007, when her tax preparer was working on

Page 2
200752044

her federal income tax return, that Taxpayer A discovered that Financial Institution B had deposited the wire transfer into a non-IRA account. Taxpayer A has not used Amount B for any other purpose.

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 B 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)(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)(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).

Page 3
200752044

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 the failure of representatives of Financial Institutions M and B to follow her instructions.

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 B 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 B to another 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 such IRA contribution, the contribution will be considered a rollover contribution within the meaning of Code section 408(d)(3).

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.

Page 4
200752044

If you wish to inquire about this ruling, please contact , at Please address all correspondence to

Sincerely yours,

Frances V. Sloan, Manager
Employee Plans Technical Group 3

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