PLR 200930050: IRS waives IRA rollover deadline after financial institution error

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who moved IRA funds into a non-IRA account after relying on advice from a financial institution. The taxpayer intended to complete the rollover, kept the funds unused, and provided documentation of the institution’s error and the taxpayer’s health condition. The IRS granted 60 days from the ruling date to contribute the amount, subject to the other rollover requirements. The ruling did not authorize a rollover of required minimum distributions.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement after a financial institution error?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3)(A)-(B), 408(d)(3)(E), and 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service

APR 27 2009

Uniform Issue List: 408.03-00

Legend:

IRA X

Account D

Amount A

Financial Institution B
Date 1

Dear:

This is in response to a request submitted on your behalf by your authorized representative dated October 29, 2008, as supplemented by additional correspondence submitted on March 9, 2009, 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:

You are more than 70 1/2 years old. You had an Individual Retirement Arrangement (IRA), IRA X, which was maintained by Financial Institution B. You represent that on Date 1, Amount A was transferred from IRA X to Account D, which was maintained by Financial Institution B. Account D is a non-IRA account. You have stated that it was your intent to complete a rollover of Amount A within the statutorily required 60-day period. At the time of this request, Amount A remains in Account D. You assert that your failure to accomplish a rollover of Amount A within the 60-day period prescribed by section 408(d)(3) of the Code was due to an error committed by Financial Institution B. You represent that Amount A has not been used for any other purpose.

You have provided documentation that details a long-standing banking relationship with Financial Institution B. You have provided documentation that representatives from Financial Institution B dissuaded you from accomplishing a timely rollover. You have provided documentation reflecting that representatives of Financial Institution B knew Amount A represented IRA funds and encouraged you to move Amount A into a non-IRA account. You have provided documentation that explains that your interaction with

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Financial Institution B was limited to telephonic conversations. You have documented that your health condition contributed to your reliance upon Financial Institution B during this transaction.

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 A 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 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) (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).

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Section 408(d)(3)(I) of the Code provides that the Secretary may waive the 60-day requirement under section 408(d)(3) (A) 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 (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) of the Code, 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 you submitted is consistent with your assertion that your failure to accomplish a timely rollover was caused by an error committed by Financial Institution B.

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 A (less amounts described below) from IRA X. You are granted a period of 60 days from the issuance of this letter ruling to contribute Amount A (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 A 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, made applicable to IRAs pursuant to section 408(a)(6).

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 expresses no opinion as to whether IRA X satisfied the requirements of section 408 of the Code.

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.

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Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative. 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 ruling letter
Notice of Intention to Disclose
cc: