PLR 201006035: Waiver of the 60-day IRA rollover requirement denied

Plain-English summary

The IRS declined to waive the 60-day rollover requirement for an individual who withdrew money from an IRA and deposited it into a non-IRA account. The taxpayer said he was unfamiliar with the IRA rules and was consolidating accounts. The IRS found that no factor outside the taxpayer's reasonable control prevented a timely rollover. The distribution therefore was not treated as a valid rollover contribution under section 408(d)(3).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement for the distribution?
• Outcome: denied
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
201006035
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 17 2009

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:

Taxpayer A

Financial Institution B
IRA C

Financial Institution D
Account E

Amount 1

Dear

This is in response to your ruling request dated [illegible], as supplemented by correspondence received September 17 and October 8, 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, age 71, represents that he withdrew funds from IRA C 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 was unfamiliar with the IRA rules.

Taxpayer A represents that he was the owner of IRA C, an 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 November 5, 200[illegible], he closed IRA C and received a distribution totaling Amount 1 from IRA C. On November 30, 200[illegible], Taxpayer A deposited the funds into Account E, a non-IRA account with Financial Institution D. Taxpayer A discovered his error when he received a Form 1099 in January 200[illegible] after the expiration of the 60-day rollover period. Taxpayer A indicated that he was unfamiliar with the IRA rules and was attempting to consolidate his accounts with Financial Institution D.

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.

201006035

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: (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 C with the intent to consolidate his accounts with Financial Institution D but did not understand the IRA rollover rules.

201006035

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. In this instance, Taxpayer A has not presented any evidence to the Service as to how any of the factors outlined in Rev. Proc. 2003- 16 affected his ability to timely rollover Amount 1. The information presented indicates that 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 C 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.

If you wish to inquire about this ruling, please contact

Sincerely,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose