PLR 200946062: 60-day IRA rollover requirement waived after financial institution error

Plain-English summary

The IRS waived the 60-day IRA rollover requirement for a distribution after a financial institution mistakenly distributed the amount and failed to follow the taxpayer's instructions. The taxpayer had not used the amount for another purpose and requested relief after learning of the error. The ruling granted 60 days from its issuance for the taxpayer to make a rollover contribution, provided all other requirements of § 408(d)(3) were met. It did not authorize rollover of minimum required distributions under § 401(a)(9).

Ruling snapshot

• Question: May the taxpayer roll over the distribution after the 60-day period because of the financial institution's error?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); IRC § 401(a)(9)

Full text (IRS public release)

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

200946062

AUG 21 2009

Uniform Issue List: 408.03-00

SE:T:EP:RA:T3
Legend:
Taxpayer A:
Date 1:
Date 2:
Date 3:

IRA X =

Financial Institution B:
Account B:

Amount M:

Dear

This is in response to your letters received March 12, 2009, and May 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.

Taxpayer A maintained an Individual Retirement Account (IRA), IRA X, with Financial Institution B. Taxpayer A, age 83, asserts that on Date 1 he received a distribution of Amount M from IRA X. Taxpayer A asserts that his failure to accomplish a rollover of Amount M was due to the error of Financial Institution B

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in erroneously distributing Amount M and failing to follow Taxpayer A’s instructions.

On Date 2 Taxpayer A discussed how to transfer his 20' required minimum distribution from IRA X to Account B with a representative of Financial Institution B. The Financial Institution B representative informed Taxpayer A that in order to accomplish the transfer of Amount M, a sale and repurchase would have to be executed. Taxpayer A replied that in the past he was able to accomplish this type of transfer by an in-kind exchange and thus avoided transaction fees and commissions. Taxpayer A indicated he was not willing to accept the sale and repurchase method and terminated the conversation. Taxpayer A asserts that he did not authorize any distribution at that time. Later in the year on Date 2, Taxpayer A arranged for a distribution of his 20 required minimum distribution from IRA X which was distributed from IRA X as he had previously requested. Subsequently after the expiration of the 60-day rollover period Taxpayer A first learned that the Date 1 conversation had resulted in a distribution and he received a Form 1099R showing both the Amount M distribution and the Date 2 required minimum distribution. Taxpayer A has not used Amount M for any other purpose.

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 M, 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

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(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)(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)(1) 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 his failure to accomplish a rollover of Amount M was due to the error of Financial Institution B in erroneously distributing Amount M and failing to follow Taxpayer A’s instructions.

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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 M 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 M 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.

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 contact Please address all correspondence to

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

Deleted copy of letter ruling
Notice of Intention to Disclose