PLR 1024073: IRS waived the 60-day IRA rollover requirement after an advisor's error

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who received a distribution from several individual retirement accounts and did not complete the rollover of the full amount on time. The taxpayer's financial advisor mistakenly calculated the amount that needed to be returned, leaving part of the distribution in another account. The IRS found that the failure was caused by the advisor's error and waived the deadline under IRC § 408(d)(3)(I). The taxpayer was given 60 days from the ruling date to contribute the specified amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Should the IRS waive the 60-day rollover requirement because the taxpayer's financial advisor made an error?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408(d)(1), 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

TREASURY
INTERNAL REVENUE SERVICE

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

201024073

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAR 22 2010

Uniform Issue List: 408.03-00

SE.T:EP:RA:T1

Legend:

Taxpayer A = **

IRA A = **

IRA B = ***

IRA C = **

IRA D = **

IRA E = ***

Account 1 = **

Amount 1 = **

Amount 2 = ***

Amount 3 = **

Financial Institution A = ***

Dear **:

This is in response to your request dated ***, as supplemented by communication
dated *****, 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 he received a net distribution totaling Amount 2 from individual
retirement accounts (“IRA”) A through E maintained with Financial Institution A. Taxpayer A
asserts that his failure to accomplish a rollover within the 60-day period prescribed by section
408(d)(3) was due to an error on the part of Taxpayer A’s financial advisor.

2 201024073

Taxpayer A, in consultation with his financial advisor, transferred Amount 2 from IRAs A
through E to Account 1. Taxpayer A’s financial advisor had been instructed to transfer
Amount 2 from Account 1 to IRA E prior to the expiration of the 60-day period. Amount 1
was transferred timely from Account 1 to IRA E. However, Amount 3, the difference
between Amounts 1 and 2, remained in Account 1 because Taxpayer A’s financial advisor
was mistaken as to the total amount originally taken from IRAs A through E, and the amount
which was to have been returned to the IRA. Taxpayer A's financial advisor has
acknowledged his error in writing. Taxpayer and his financial advisor became aware of this
mistake when filing Taxpayer A’s returns for the year at issue.

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

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),

5 201024073

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 was caused by an error on the
part of Taxpayer A’s financial advisor.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-
day rollover requirement under section 408(d)(3)(A) with respect to Amount 3. Taxpayer A
is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 3 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 3 will be considered a
rollover contribution within the meaning of section 408(d)(3) 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 * (Identification Number
*) at () -. Please address all correspondence to **.

Sincerely yours,

Carlton A. Watkins, Manager,
Employee Plans Technical Group 1