PLR 200825054: IRA rollover deadline waived after an account posting error

Plain-English summary

A taxpayer sent a distribution from one IRA to an investment company with written instructions to deposit it in her IRA. The company posted the check to her non-IRA account instead, and she discovered the error after the 60-day rollover period had passed. She represented that the money remained in that account and had not been used for another purpose. The IRS waived the 60-day deadline under section 408(d)(3)(I), finding her account consistent with a posting error. She received 60 days from the letter's issuance to put the amount into a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Would the IRS waive the 60-day IRA rollover deadline after the receiving company posted the check to a non-IRA account?
• Outcome: Approved, with 60 days from issuance to make the rollover contribution.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

200825054

MAR 28 2008

Uniform Issue List: 408.03-00

SE: T: EP: RA: T4

Legend:

Taxpayer A =
Financial Institute B =
Company C =
Amount D =
Date G =
Date H =
IRA X =

Dear

This is in response to your letter dated January 19, 2007, as supplemented by additional correspondence dated February 25, 2008, for 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 49, represents that she received a distribution from IRA X totaling Amount D. Taxpayer A asserts that her failure to accomplish a rollover of Amount D within the 60-day period prescribed by section 408 (d)(3) of the Code was due to Company C placing Amount D into her non-IRA account with Company C. Taxpayer A represents that Amount D has not been used for any other purpose and remains in her non-IRA account with Company C.

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200825054

Taxpayer A maintained an IRA and a non-IRA investment account with Company C, the account numbers were the same except for the last two digits. On Date G, Taxpayer A received a check for Amount D from Financial Institute B which represented her full account balance in IRA X. On Date H, Taxpayer A sent the check to Company C with written instructions to deposit Amount D into her IRA. The check was erroneously posted into her non-IRA account by Company C. Taxpayer A became aware of the mistake when preparing her income tax returns, which was beyond the 60-day rollover period.

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

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 or 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.

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Section 408(d)(3)(I) of the Code provides that the Secretary of the Treasury may waive the 60-day requirement under sections 408(d)(3)(A) and (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.

Revenue Procedure 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 her assertion that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to an error by Company C in placing Amount D into her non-IRA with Company C.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-day rollover requirement with respect to Amount D. Taxpayer A is granted a period of 60-days from the issuance of this ruling letter to contribute Amount D into a rollover IRA. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day rollover requirement, are met with respect to such contribution, Amount D 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 that may be applicable hereto.

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

This ruling is directed solely to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

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If you have any questions regarding this ruling, you may contact
at

Sincerely yours,

, Manager
Employee Plans Technical Group

Enclosures:

Notice of Intention to Disclose
Deleted copy of this letter

cc: