PLR 1028046: The IRS waived the 60-day rollover deadline after erroneous financial advice

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who delayed rolling an IRA distribution over after receiving erroneous advice from a financial advisor. The taxpayer had requested liquidation of IRA investments, received checks, and was incorrectly told that they could be deposited into another IRA at any time. The taxpayer did not use the distributed amount for another purpose. The IRS granted 60 days from the ruling date to contribute an equal amount to an IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover requirement under IRC § 408(d)(3)(I)?
• Outcome: approved, subject to satisfying the other rollover requirements
• Key authorities: IRC §§ 72, 408(a), 408(d)(1), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201028046

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

APR 2 0 2010
SE:T:EP:RA:T3
Legend:

Taxpayer A:

IRA X:

Date 1:

Amount M:

Month 10:

Investment Advisor G:

Financial Institution L:

Month 2:

Dear

This is in response to your letters dated July 15, 2009, February 26, 2010, March
10, 2010, and March 26, 2010, submitted on your behalf by 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 (“the Code”).

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

Taxpayer A, age 67, maintained an Individual Retirement Account (IRA), IRA X.
Taxpayer A asserts that on Date 1 Taxpayer A requested a distribution of
Amount M from IRA X and that his failure to accomplish a rollover of Amount M
within the 60-day period prescribed by section 408(d)(3) of the Code was due to
erroneous advice provided him by his financial advisor, Investment Advisor G.

Page 2

During Month 10 Taxpayer A became concerned about market conditions and
contacted his investment advisor, Investment Advisor G of Financial Institution L
and requested that all investments in IRA X be liquidated to prevent further loss.

On Date 1 Taxpayer A requested a rollover of Amount M which had been held in
IRA X at Financial Institution L. On Date 1 checks were issued totaling Amount
M. After Taxpayer A received the checks in the mail Taxpayer A sought advice
from Financial Advisor G and was advised that the checks could be deposited at
any time into another IRA. Financial Advisor G failed to inform Taxpayer A of the
60-day rollover period. Relying on the advice of Financial Advisor G, Taxpayer A
delayed cashing the checks and failed to accomplish a timely rollover.

After the expiration of the 60-day rollover period, during Month 2, Taxpayer A
learned from his accountant that he had missed the 60-day rollover period.

Taxpayer A has not used Amount M for any other purpose.

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

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(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)(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.

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 rollover of Amount M

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within the 60-day period prescribed by section 408(d)(3) of the Code was due to
erroneous advice provided him by his financial advisor, Investment Advisor G.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distribution of Amount
M from IRA X. Pursuant to this ruling letter, Taxpayer A is granted a period of 60
days measured from the date of the issuance of this letter ruling to make a
rollover contribution of an amount equal to Amount M to an IRA (or IRAs)
described in Code section 408(a). Provided all other requirements of Code
section 408(d)(3), except the 60-day requirement, are met with respect to such
IRA contribution, the contribution will be considered a rollover contribution within
the meaning of Code section 408(d)(3).

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 is sent to your authorized representative pursuant to
the provisions of a Power of Attorney on file in this office.

If you have any questions, please contact

Sincerely yours,

Frances V. Sloan, Manager
Employee Plans Technical Group 3

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