PLR 200935048: Sixty-day rollover requirement waived after erroneous IRA deposit

Plain-English summary

An individual intended to make a direct rollover from one IRA to another, but an employee of the receiving company mistakenly deposited the distributed amount into a non-IRA account. The individual discovered the error after the 60-day period and had not used the amount for another purpose. The IRS waived the 60-day rollover requirement and granted 60 days from the ruling date to contribute the amount, less any required distribution amounts, to a rollover IRA. The ruling did not authorize a rollover of amounts required to be distributed under the applicable minimum distribution rules.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover requirement after an erroneous deposit into a non-IRA account?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

JUN -3 2009

Uniform Issue List: 408.03-00

SE:T:EP:RA:T3

Legend:

IRA X

Amount A

Date 1

Date 2

Date 3

Company A

Company B
Dear:

This is in response to a request you submitted on March 17, 2009, as supplemented by correspondence dated May 19, 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 74 years old. You had an Individual Retirement Arrangement (IRA), IRA X, which was maintained by Company A. You represent that you intended to roll over the distribution of Amount A from IRA X within the 60-day period prescribed by section 408 (d) (3) of the Code but were unsuccessful. Your intent was to roll over Amount A from IRA X to an IRA with Company B. You assert that your failure to accomplish this rollover of Amount A was due to an error caused by an employee of Company B.

You assert that your intent was to complete a direct rollover of the assets of IRA X to an IRA established with Company B. You explain that you had discussed the rollover of Amount A with a financial advisor representing Company B before the distribution from

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IRA X and that you had submitted paperwork to effectuate a direct rollover of the IRA X assets. However, on Date 1, Company A mailed a distribution check to you. The amount of the distribution was Amount A. You document that on Date 2, you deposited Amount A with Company B. You state that you maintain an IRA and non-IRA account with Company B. You represent that Amount A was erroneously deposited into a non- IRA account by an employee of Company B on Date 2. You discovered this error on Date 3 and contacted your financial advisor representing Company B. Company B employee's error was discovered at that time.

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).

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

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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 due to an error caused by an employee of Company 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 (less amounts described below) 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.

If you wish to inquire about this ruling, please address all correspondence to SE:T:EP:RA:T3.

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