PLR 200938041: 60-day rollover waiver denied

Plain-English summary

A taxpayer withdrew funds from three IRAs and placed them in a personal checking account, believing the rollover period was 90 days rather than 60 days. The taxpayer requested a waiver of the 60-day rollover requirement. The IRS declined because the taxpayer’s misunderstanding was not an event beyond the taxpayer’s reasonable control, and the taxpayer could have redeposited the funds within the 60-day period. The distributions therefore did not qualify as valid rollover contributions under section 408(d)(3).

Ruling snapshot

• Question: Could the taxpayer receive a waiver after missing the 60-day IRA rollover deadline because of a mistaken belief that the deadline was 90 days?
• Outcome: Denied.
• Key authorities: IRC §§ 72, 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

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

JUN 23 2009

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00
SE:T:EP:RA:T1

Legend:

Taxpayer A

Financial Institution B
IRA X

IRA Y

IRA Z

Amount 1

Dear XXXXXXXXX:

This is in response to your ruling request dated January 20, 2009, from your authorized representative, as supplemented by correspondence dated March 3, 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:

Taxpayer A represents that he withdrew funds from three separate IRA's totaling Amount 1. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d) of the Code was because he thought he had 90 days in which to deposit Amount 1 into a new IRA account.

Taxpayer A represents that he was the owner of IRA X, IRA Y, and IRA Z, each a qualified individual retirement arrangement (“IRA”) established and maintained at Financial Institution B under the rules of section 408 of the Code. Taxpayer A represents that on October 9, 2008, he received distributions totaling Amount 1 from IRA X, IRA Y, and IRA Z and placed the funds into his personal checking account with the idea that he needed a period of time to decide where to re-invest the funds. Taxpayer A asserts that he thought he had 90 days in which to rollover Amount 1.

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Based on the above facts and representations, you request a ruling that the Internal Revenue Service (“Service”) waive the 60-day rollover requirement contained in section 408(d)(3) of the Code with respect to the distribution of Amount 1.

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)(D) of the Code provides a similar 60-day rollover period for partial rollovers.

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:

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(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 the documentation submitted in this case indicates that Taxpayer A withdrew Amount 1 from IRA X, IRA Y, and IRA Z with the intent to redeposit such funds at a later time into another IRA that would yield a better rate of return. Taxpayer A’s failure to accomplish a rollover within the 60-day period was due to his inadvertence in thinking he had 90 days in which to rollover Amount 1 into another IRA.

The Service has the authority to waive the 60-day rollover requirement for a distribution from an IRA where the individual failed to complete a rollover to another IRA within the 60-day rollover period but was prevented from doing so because of one of the factors enumerated in Revenue Procedure 2003-16, for example errors committed by a financial institution, death, hospitalization, postal error, incarceration, and/or disability. Although there was a misunderstanding as to the time period permitted to complete a tax-free rollover, the ability to redeposit Amount 1 into an IRA within the 60-day rollover period was, at all times, within the reasonable control of Taxpayer A.

Under the circumstances presented in this case, the Service hereby declines to waive the 60-day rollover requirement with respect to the distribution of Amount 1 from IRA X, IRA Y, and IRA Z and thus Amount 1 will not be considered a valid rollover contribution within the meaning of section 408(d)(3) of the Code, because the 60-day rollover requirement was not satisfied.

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 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.

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

200938041

If you wish to inquire about this ruling, please contact XXXXXXKXXKXXXKXKX (Government Identification Number XX-XXXXX) by phone at (XXX) XXX-XXXX or by fax at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,

/s/

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

cc: