PLR 1026043: IRS waived the 60-day rollover deadline after a bank merger error

Plain-English summary

The IRS waived the 60-day rollover requirement for a surviving spouse who received a distribution from an IRA and intended to roll most of it into another IRA. A bank merger and changes in the bank's investment advisory function caused the rollover amount to be placed into a taxable non-IRA account. The IRS found that the financial institution's error caused the missed deadline and treated the amount as a rollover contribution, provided the other rollover requirements were met. The ruling did not authorize a rollover of a required minimum distribution.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover deadline after a bank merger caused the intended rollover funds to be placed in a taxable account?
• Outcome: approved
• Key authorities: IRC §§ 72, 401(a)(9), and 408(d)(1), 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16; IRC § 6110(k)(3)

Full text (IRS public release)

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201026043

WASHINGTON, D.C. 20224

XXXXX
XXXXX
XXXXX

Uniform Issue List: 408.03-00

Legend:

Taxpayer A= XXXXX
Taxpayer B= XXXXX
Bank M= XXXXX
Bank N= XXXXX
Bank O= XXXXX
Bank P= XXXXX
IRA X= XXXXX
Account F= XXXXX
Amount S= XXXXX
Amount T= XXXXX
Amount U= XXXXX
Date1= XXXXX

Date 2= XXXXX

Date 3= XXXXXX

SE: T: EP: RA: T2

APR 06 2010

XXXXX 201026043

Dear XXXXX:

This is in response to your letter dated July 24, 2009 as supplemented by
additional correspondence submitted on October 6, 2009 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 XXXXX represents that she received a distribution from IRA X
totaling Amount S. Taxpayer A asserts that her failure to accomplish a rollover of
Amount T (Amount S less Amount U, funds which Taxpayer A used to cover
expenses related to Taxpayer B’s death) within the 60-day period prescribed by
section 408(d)(3) of the Code was due to the error of Bank N resulting from
confusion during a merger of Bank O and Bank P, (which became Bank N),
which led to Amount T being placed into a non-IRA account. Taxpayer A
represents that Amount T 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, Taxpayer A, as surviving spouse of Taxpayer B
and as beneficiary of IRA X, withdrew the entire account balance of IRA X,
Amount S from Bank M. On Date 3, Taxpayer A deposited Amount T into an
account at Bank N, which she intended to be an IRA. However, as a result of a
merger between Bank O and Bank P, Bank N placed Amount T into a non-
retirement taxable account, Account F.

Bank N submitted documentation that indicates Taxpayer A intended to deposit
Amount T into an IRA, however because of the merger of Banks O and P, along
with Bank N changing its investment advisory function, the source of Taxpayer
A’s deposit was not connected to her distribution from IRA X, resulting in Amount
T being placed into a non-IRA account, Account F.

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 T.

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 distribute 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

XXXXX 201026043

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.

XXXXX 201026043

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 caused by the error of Bank N
resulting from confusion associated with the merger of Bank O and Bank P,
which led to Amount T being placed in a non-IRA account with Bank N.

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 T.
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 XXXXX,
SE:T:EP:RA:T2, I.D. No. XXXXX, at (XXX) XXXXX.

Sincerely yours,
[illegible]

Enclosures:

Deleted Copy of Ruling Letter

Notice of Intention to Disclosure

CC:
[illegible]