PLR 200946063: 60-day IRA rollover requirement waived after bank error

Plain-English summary

The IRS waived the 60-day IRA rollover requirement for two distributions after finding that the taxpayers' failure to complete timely rollovers was caused by a bank's error. The bank representative opened non-IRA certificates of deposit when the taxpayers intended to renew their IRA CDs, and a financial-institution employee acknowledged the mistake in an affidavit. The waiver applies only if all other requirements of § 408(d)(3), apart from the 60-day requirement, are satisfied. The ruling does not authorize rollover of amounts required to be distributed under § 401(a)(9).

Ruling snapshot

• Question: May the taxpayers roll over the two IRA distributions after the 60-day period because of the bank'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

200946063
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

AUG 20 2009

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:
Taxpayer A
Taxpayer B
IRA C

IRA D
Bank E
Amount 1

Amount 2

Dear

This letter is in response to a request for a letter ruling dated March 11, 2008, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code ("Code").

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested:

Taxpayer A, age 76, and Taxpayer B, age 76, (“Taxpayers A&B”) represent that they received distributions from IRA C and IRA D (IRAs C&D) totaling Amount 1 and Amount 2, respectively. Taxpayers A&B assert that their failure to accomplish a rollover within the 60- day period prescribed by section 408(d)(3) was due to an error committed by Bank E.

Taxpayers A&B, represent that in September 20 __, they went to Bank E to renew their IRA CDs, IRA B and IRA C respectively. On September 2, 2005, they met with a representative of Bank E who mistakenly opened non-IRA CDs. An employee of Financial Institution D signed an affidavit acknowledging it was their error that caused Amount 1 and Amount 2 to be deposited in non-IRA CDs.

200946063

Based on the above facts and representations, Taxpayers A&B request that the Service waive the 60-day rollover requirement contained in Code section 408(d)(3) with respect to the distributions of Amount 1 and Amount 2.

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)(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

200946063

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 by Taxpayers A&B is consistent with their assertion that their failure to accomplish a timely rollover was caused by an error committed by Bank E.

Therefore, pursuant to Code section 408(d)(3)(I), the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount 1 and Amount 2 from IRAs C&D, respectively. 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 1 and Amount 2 will be considered rollover contributions 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.

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.

A copy of this letter ruling has been sent to your authorized representative pursuant to a power of attorney on file in this office. If you wish to inquire about this ruling, please contact at

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437