PLR 201016093: Sixty-day rollover waiver granted after an unauthorized IRA withdrawal

Plain-English summary

The IRS waived the 60-day rollover deadline after an individual with power of attorney withdrew funds from an elderly taxpayer's IRA without the taxpayer's knowledge or consent. The funds were placed in a certificate of deposit and later returned with interest, but the 60-day period had expired before the taxpayer's new power of attorney could deposit them back into an IRA. The IRS granted the taxpayer 60 days from the ruling letter to roll over no more than the withdrawn amount minus required minimum distributions, provided the other rollover requirements were met. The ruling was based on the waiver authority in IRC section 408(d)(3)(I).

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover requirement after an unauthorized withdrawal?
• Outcome: approved
• Key authorities: IRC §§ 408(d)(3), 408(d)(3)(A), 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 25 2010

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:
Taxpayer A
Individual A
Individual B
Bank M
Bank N
IRA A
Amount A

Amount B

Dear

This is in response to a ruling request submitted by your authorized representative dated September 30, 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 81, represents that on June 26, 2009, Individual A, who had power of attorney for Taxpayer A’s health care and property, withdrew Amount A from IRA A at Bank M without her knowledge or consent.

On July 3, 2009, Individual A deposited Amount A into a certificate of deposit at Bank N in his and his wife’s name.

Upon discovering the withdrawal from IRA A, Taxpayer A made arrangements to retrieve the funds from Individual A. At Taxpayer A’s request, Individual A retrieved Amount A from Bank N in the form of a check for Amount B (Amount A plus earned interest) on August 25, 2009. The check was made out to Bank M FBO Taxpayer A. Individual B, Taxpayer A’s new power of attorney, received the check for Amount B on August 26, 2009, after the 60- day rollover period had expired. On August 26, 2009, Individual B attempted to deposit Amount A into an IRA at Bank M. Bank M would not accept the deposit because the 60- day rollover period had expired.

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 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 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 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 is consistent with Taxpayer A’s assertion that Amount A was withdrawn from IRA A without Taxpayer A’s knowledge or consent.

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 A. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to roll over no more than Amount A minus all required minimum distributions. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contributions, Amount A minus all required minimum distributions 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.

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

cc: