Determination 200952067: 60-day IRA rollover waiver granted after bank error

Plain-English summary

An IRA owner received a distribution and instructed a bank to deposit the check into a rollover IRA, but the bank instead placed the funds in a non-IRA certificate of deposit. The owner did not discover the error until after the 60-day rollover period had expired, and the bank acknowledged the mistake. The IRS waived the 60-day requirement and granted 60 days from the ruling letter to contribute the distribution to a rollover IRA, provided the other rollover requirements were met. The ruling was based on the submitted facts and representations.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement after a bank mistakenly deposited the distribution into a non-IRA account?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408(d)(1), 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

200952067

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

OCT 01 2009

UIL No. 408.03-00
SE:T:EP:RA:T4

Legend:

Taxpayer A =
Insurance Company B =
Individual C =
Bank W =
IRA X =
Account S =
Amount A =
Date 1 =
Date 2 =

Date 3 =

Dear

This is in response to your request submitted by your authorized representative dated , as supplemented by correspondence dated
, 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,

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Taxpayer A, age_, represents that, on Date 1, she received a distribution from IRA X totaling Amount A. Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to an error made by Bank W. Taxpayer A further represents that Amount A has not been used for any other purpose.

Taxpayer A received a distribution of Amount A from IRA X on Date 1. On Date 2, Taxpayer A went to Bank W and instructed Individual C to deposit the distribution check for Amount A in a rollover IRA. Despite her instructions, Individual C placed Amount A in Account S, a non-IRA certificate of deposit. Taxpayer A did not become aware that the distribution from IRA X had been deposited into a non-IRA account until after the 60-day rollover period had expired. Once Taxpayer A became aware of the error, she contacted Bank W and, on Date 3, Bank W issued a letter acknowledging that Individual C had deposited Amount A into Account S in error.

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.

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

200952067

Page 3 of 4

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.

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), 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 her assertion that her failure to accomplish a timely rollover was caused by an error made by Bank W.

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 from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount A 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.

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.

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

If you wish to inquire about this ruling, please contact (ID No.
)at( ) - . Please address all correspondence to SE:T:EP:RA:T4.

Sincerely yours,

[illegible signature]
Laura B. Warshawsky, Manager,
Employee Plans Technical Group 4

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

cc: