PLR 1021040: IRS waived the 60-day IRA rollover deadline after incorrect advice

Plain-English summary

The IRS waived the 60-day rollover deadline for a taxpayer who was incorrectly told by a financial advisor that the taxpayer had 90 days to deposit an IRA distribution into a new IRA account. The taxpayer deposited the funds into a non-IRA account and completed the rollover 83 days after the distribution. The IRS granted 60 days from the ruling letter to contribute the amount to a rollover IRA, provided the other rollover requirements were satisfied. The ruling did not authorize a rollover of amounts required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement when a taxpayer relied on incorrect advice about the deadline?
• Outcome: Approved
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(3), and 6110(k)(3); 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

Uniform Issue List: 408.03-00

MAR 04 2010

XXXXXXXX
XXXXXXXX
XXXXXXXX

Legend:
Taxpayer A = XXXXXXXXXX
Financial Advisor B = XXXXXXXXXX
Financial Institution C = XXXXXXXXXXX
Financial Institution D = XXXXXXXXXX
Company W = XXXXXXXXXXX
IRA X = XXXXXXXXXXXXX
XXXXXXXX
XXXXXXXX
Amount 1 = XXXXXXXXXX
Date 1 = XXXXXXXXXXX
Date 2 = XXXXXXXXXXX

Dear XXXXXXXXX:

This is in response to your ruling request dated July 29, 2009, submitted on your behalf
by your authorized representative, as supplemented by correspondence dated
September 30, 2009, and January 14, 2010, 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 represents that on Date 1, he received a distribution of Amount 1 from IRA
X. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period
prescribed by section 408(d) of the Code was due to incorrect advice provided by
Financial Advisor B that he had 90 days instead of 60 days in which to deposit Amount
1 into a new IRA account.

XXXXXXXXX

Taxpayer A represents that he was the owner of IRA X, an individual retirement
arrangement (“IRA”) established and maintained at Financial Institution C under the
rules of section 408 of the Code. Taxpayer A represents that on Date 1, he received a
distribution of Amount 1 from IRA X. Taxpayer A asserts that prior to the distribution, he
talked to Financial Advisor B and was advised that he had 90 days to rollover the
distribution without any tax consequences. He deposited Amount 1 into a non-IRA
account at Financial Institution D, with the intention of rolling it over into an IRA.
However, Taxpayer A did not complete the rollover until Date 2, which was 83 days
from the date of the distribution. At the time of the distribution, he was on disability
leave from Company W and was concerned about being able to return to work at
Company W because of his disability. He is currently on his second disability leave
from Company W and has only been able to work six months in the last two and a half
years.

Taxpayer A has provided documentation supporting his contention that he was provided
with erroneous advice by Financial Advisor B.

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.

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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 documentation submitted by Taxpayer A is consistent
with his assertion that his failure to accomplish a timely rollover within the 60-day period
was due to the incorrect advice provided by Financial Advisor B that he had 90 days in
which to rollover Amount 1 into another IRA. Taxpayer A, in fact, redeposited Amount 1
83 days after the distribution.

Under the circumstances presented in this case, the Service hereby waives the 60-day
rollover requirement with respect to the distribution of Amount 1 from IRA X. Taxpayer A
is granted a period of 60 days from the issuance of this ruling letter to contribute
Amount 1 to 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 1 will be considered a valid rollover contribution within the meaning of section
408(d)(3) of the Code.

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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.

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

If you wish to inquire about this ruling, please contact XXXXXXXXX (Government
Identification Number XX-XXXXX) by phone at XXX-XXXXXXX. Please address all
correspondence to SE:T:EP:RA:T2.

Sincerely,

Donzell Littlejohn, Manager
Employee Plans Technical Group 2

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose