PLR 1020033: IRS waived the 60-day IRA rollover requirement

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who received a distribution from an inherited IRA. The taxpayer said that a bank employee's clerical error placed the money in a taxable account instead of the taxpayer's IRA, and the taxpayer did not use the money for another purpose. The IRS found that the failure to complete the rollover on time resulted from the financial institution's error and treated the amount placed into the IRA as a rollover contribution, assuming the other requirements were met. The ruling did not authorize the rollover of minimum required distributions under section 401(a)(9).

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover requirement because a bank error prevented a timely rollover?
• Outcome: Approved
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(3), and 6110(k)(3)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201020033

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

FEB 23 2010
SE:T:EP:RA:T2

kkekkkk

KRKKKKE

Legend:

KeEKKKK

Taxpayer A=

Taxpayer B=

Bank M= **

IRA X= **
IRA Y= *
Account F= ***

Account G= **
Account H= *
Amount S=
Date1= ***

Date 2= **

Date 3= **

Dear **:

Page 2

This is in response to your letter dated ** as supplemented by additional
correspondence submitted on * submitted on your behalf by your authorized
representative, in which you requested 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 your ruling request.

Taxpayer A, age ** represents that she received a distribution from IRA X
totaling Amount S. Taxpayer A asserts that her failure to accomplish a rollover of
Amount S within the 60-day period prescribed by section 408(d)(3) of the Code
was due to an error by an employee of Bank M, which led to Amount S being
placed into a non-IRA account. Taxpayer A represents that Amount S has not
been used for any other purpose.

Taxpayer A’s deceased spouse, Taxpayer B maintained IRA X with Bank M until
his death on Date 1. On Date 2, documentation was completed by Taxpayer A,
as surviving spouse of Taxpayer B and as sole beneficiary of IRA X, to transfer
Amount S from IRA X into her previously established IRA Y which held Account
F. However, due to a clerical error made by an employee of Bank M, Amount S
was placed into a non-retirement taxable account, Account G, which was not
included in IRA Y. On Date 3, after Account G matured, Taxpayer A transferred
Amount S into Account H, which was included in IRA Y. Acting under the
assumption that Account H should not be included in IRA Y because Account G
was not included in IRA Y, Bank M moved Amount S into a non-retirement
taxable account. On a later date, Bank M discovered that the failure to maintain
Account H in IRA Y was a result of the improper coding of Account G as a non-
qualified retirement account.

Documentation from Bank M admits that an error was made by an employee of
Bank M and that Amount S was not invested into an IRA as Taxpayer A had
requested.

Based upon the above facts and representations, you request that the Internal
Revenue Service waive the 60-day rollover requirement contained in section
408(d)(3) of the Code with respect to the distribution of Amount S.

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

201020033

7 “ea ak ak ok ok

Page 3

Code does not apply to any amount paid or distributed out of an IRA to the
individual to whose benefit the account 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 he 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 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.

Revenue Procedure 2003-16, 2003-4 I.R.B. 359, provides that in determining
whether to grant a waiver of the 60-day rollover requirement pursuant to section
408(d)(3)(I) of the Code, 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; and, (4) the time elapsed since the distribution
occurred.

Page 4

The information and documentation submitted by Taxpayer A is consistent with
her assertion that her failure to accomplish the rollover within the 60-day period
prescribed by Section 408(d)(3) of the Code was due to an error by Bank M
which led to Amount S being placed in a non-IRA account.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the IRS hereby waives
the 60-day rollover requirement with respect to the distribution of Amount S.
Provided all other requirements of section 408(d)(3) of the Code, except the 60-
day rollover requirement are met with respect to Amount S which was placed in
IRA Y will be considered a rollover contribution within the meaning of section
408(d)(3) of the Code.

Please note that, pursuant to section 408(d)(3)(E) of the Code, this ruling does
not authorize the rollover of Code section 401(a)(9) minimum required
distributions.

No opinion expressed as to the tax treatment of the transaction described herein
under the provisions of any other section of either the Code or regulations that
may be applicable hereto.

This ruling is directed solely 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 have any questions regarding this ruling, please contact ,
SE:T:EP:RA:T2, |.D. No. , at .

Sincerely yours,

Donzell H. Littlejohn, Manager
Employee Plans Technical Group 2

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclosure

CC:

kkekkkK