PLR 201023073: IRS waived the 60-day IRA rollover deadline

Plain-English summary

A taxpayer received a distribution from an IRA but the financial institution deposited the funds into a non-IRA mutual fund account instead of the taxpayer’s IRA. The taxpayer said the funds had not been used and that the institution failed to follow her instructions. The IRS waived the 60-day rollover requirement and granted 60 days from the letter’s issuance for the taxpayer to contribute the amount to a rollover IRA. The contribution would qualify as a rollover if the other § 408(d)(3) requirements were met.

Ruling snapshot

• Question: Can the taxpayer receive a waiver of the 60-day IRA rollover requirement?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408, and 6110

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

[illegible]

TAX EXEMPT AND

GOVERNMENT ENTITIES
MAR 18 2010

DIVISION

Uniform Issue List: 408.03-00

[illegible]

Legend:
Taxpayer A =

IRA B =

Financial Institution C

IRA D =

Account E =

Financial Institution F

Amount 1 =

Dear

This letter is in response to a request for a letter ruling dated July 24, 2008, as supplemented by additional information dated October 26, and December 21, 20' , and March 2, 20°, from your authorized representative, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code ("Code"), regarding the distribution of Amount 1 from IRA B maintained with Financial Institution C.

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested:

Taxpayer A, age 60, at the time of the distribution of Amount 1 from IRA B, 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 the failure of Financial Institution F to follow Taxpayer A’s instructions. Taxpayer A further asserts that Amount 1 has not been used for any purpose.

201023073

Taxpayer A maintained IRA B, an individual retirement account under section 408(a) of the Code, with Financial Institution C. Taxpayer A represents that in October, 20 she began a business relationship with Financial Institution F when she opened Account E, a non-IRA mutual fund account with her spouse. In order to keep all of her accounts with one institution, during that meeting, Taxpayer A also discussed her IRAs at Financial Institution C. Since the IRAs were certificates of deposit (“CD's”), it was decided that she would transfer these IRAs to Financial Institution F as the CDs matured. In November, 20! __, the first CD matured and Taxpayer A requested a distribution and received a check made payable FBO Taxpayer A. Taxpayer A on the same day went to Financial Institution F, established IRA D, and completed the rollover. Over the course of the next year and a half, Taxpayer A represents that she discussed, with her representative at Financial Institution F, the 20 maturity date of her other IRA CD at Financial Institution C. In June 20! with the maturity date approaching, Taxpayer A represents that she discussed the approaching maturity date and was instructed to withdraw the funds on that date and deposit the funds in her IRA with Financial Institution F. On June 9, 20. , Taxpayer A received a distribution of IRA B in Amount 1 and went to Financial Institution F where she presented the check, made payable to Taxpayer A rather than FBO, to her representative and indicated this was her final IRA check. Instead of depositing the check in IRA B, Financial Institution F deposited the funds in Taxpayer A’s non-IRA mutual fund. Taxpayer A did not become aware that the funds had

been deposited into a non-IRA account until her tax preparer examined a Form 1099R for 2008 showing a taxable distribution.

Based on the above facts and representations, you request 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.

Section 408(d)(1) of the Code provides that, except as otherwise provided in section 408(d) of the Code, 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 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) of the Code).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code does not apply to any amount described in section 408(d)(3)(A)(i) of the Code 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) of the Code from an IRA which was not

includible in gross income because of the application of section 408(d)(3) of the Code.

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) 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 (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 by Taxpayer A is consistent with her assertion that her failure to accomplish a timely rollover of Amount 1 was due to the failure of Financial Institution F to follow her instructions.

Therefore, pursuant to Code section 408(d)(3)(I), the Service hereby waives

the 60-day rollover requirement with respect to the distribution of Amount 1 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this letter ruling to contribute Amount 1 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 1 will be considered a 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.

A copy of this letter ruling has been sent to your authorized representative pursuant to a power of attorney on file in this office. If you wish to inquire about this ruling, please contact (1.D. # ), ,at( ) -

Sincerely yours,

Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437

CC: