PLR 200832025: IRA rollover deadline waived after bank coding error

Plain-English summary

A taxpayer directed one financial institution to transfer money from his SEP-IRA into a SEP-IRA at another institution. The receiving institution mistakenly placed the money in a nonqualified account, and the taxpayer discovered the error more than a year later. The funds remained there and had not been used for another purpose. The IRS waived the 60-day rollover deadline because the institution's records supported the taxpayer's account of its clerical error. The taxpayer received 60 days from the ruling to contribute the amount to a rollover IRA; the IRS said it would count as a rollover if the other requirements of section 408(d)(3) were met.

Ruling snapshot

• Question: Would the IRS waive the IRA rollover deadline after the receiving institution misclassified the transferred funds?
• Outcome: Approved; the taxpayer received 60 days to complete the contribution.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

200832025

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

MAY 14 2008

Uniform Issue List: 408.03-00
T:EP:RA:T:4

Legend:

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

Dear ;

This is in response to your request dated June 27, 2007, as supplemented by additional correspondence dated December 6, 2007, and March 21, 2008, submitted on your behalf by your authorized representative 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 58 represents that he received a distribution from SEP-IRA X totaling Amount D. Taxpayer A asserts that his 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 Financial Institute C improperly coding and transferring Amount D into a nonqualified account. Taxpayer A represents that Amount D has not been used for any other purpose and remains in Financial Institute C.

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Taxpayer A maintained SEP-IRA X with Financial Institute B. On Date G, an open year, Taxpayer A transferred Amount D to Financial Institute C with instructions that Amount D be put into his SEP-IRA. On Date H, Taxpayer A contacted Financial Institute C to request a distribution from his SEP-IRA, at which time he learned that Amount D had been placed in a nonqualified account. Financial Institute C provided documentation that it had committed a clerical error by improperly coding and transferring Amount D to a non-qualified account. Financial Institute C also indicated that it attempted to move Amount D back into a SEP-IRA but it could not because the transaction had occurred more than 12 months ago.

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

200832025

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 his assertion that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to Financial Institute C improperly coding and transferring Amount D into a nonqualified account.

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 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 in this office, a copy of this letter ruling 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 [illegible] at [illegible].

Sincerely yours,

[illegible]
Manager
Employee Plans Technical Group 4

Enclosures:

Notice of Intention to Disclose
Deleted copy of this letter