IRS waives IRA rollover deadline after representative misplaces transfer funds

Plain-English summary

An 83-year-old IRA owner asked a financial representative to move an IRA annuity to an IRA at a closer bank. The representative instead placed the portion she had not used in a non-IRA account, and the 60-day rollover period expired. The IRS accepted her account of the representative's failure and waived the deadline for that unused portion. She had 60 days from the ruling date to deposit an equal amount into an IRA, subject to the other rollover requirements. The ruling did not allow required minimum distributions to be rolled over.

Ruling snapshot

• Question: Could the taxpayer complete a late rollover of the portion of her IRA distribution placed in a non-IRA account?
• Outcome: Approved for the unused portion, with 60 days from the ruling to contribute it to an IRA.
• Key authorities: IRC §§ 408(d)(3)(I), 408(d)(3)(E), 401(a)(9); Rev. Proc. 2003-16.

Full text (IRS public release)

200832037

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

MAY 15 2008
Uniform Issue List: 408.03-00
T:EP:RA:T:3
Legend:
Taxpayer A =
IRA X =
Date 1 =
Date 2 =

Financial Representative Z =

Bank L =

Bank A =

Amount C =

Amount D =

Dear

This is in response to a letter dated June 20, 2007, and as supplemented by letters dated October 3, 2007, November 12, 2007, and February 5, 2008, 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.

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Taxpayer A, age 83, asserts that on Date 2 Taxpayer A received a distribution from IRA X of Amount C. Taxpayer A asserts her failure to accomplish a rollover of Amount D was due to her reliance on Financial Representative Z to coordinate a rollover of IRA X to a rollover IRA and the failure of Financial Representative Z to follow Taxpayer A’s instructions.

Taxpayer A asserts that she had previously established a rollover IRA annuity, IRA X, with the assistance of Individual Z, an agent of Bank L, on Date 1. Subsequently, Taxpayer A contacted Financial Representative Z to discuss rolling over IRA X to a Bank A IRA in order to transfer her IRA funds to a bank closer to her home for convenience. During the five-year period Taxpayer A held IRA X, Financial Representative Z provided Taxpayer A with consistent and timely financial advice concerning tax withholding and required minimum distributions. Financial Representative Z arranged for the closing of IRA X providing to Taxpayer A the papers necessary for a full surrender of the IRA X annuity policy in Amount C. Financial Representative Z failed to take appropriate actions in processing the rollover with the result that Amount D (Amount C less funds used by Taxpayer A) was placed in a non-IRA account at Bank A.

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

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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).

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 Taxpayer A’s assertion that her failure to accomplish a rollover of Amount D was due to her reliance on Financial Representative Z to coordinate a rollover of IRA X and the failure of Financial Representative Z to follow Taxpayer

A’s 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 of Amount

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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 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.

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
Please address all correspondence to

SE:T:EP:RA:T3.
Sincerely yours,
Frances V. Sloan, Manager
Employee Plans Technical Group 3
Enclosures:

Deleted copy Of letter ruling
Notice of Intention to Disclose