PLR 201029022: IRS waives the 60-day rollover requirement after a bank error

Plain-English summary

A surviving spouse asked the IRS to waive the 60-day deadline for rolling her deceased husband's flexible annuity IRA into a rollover IRA. She endorsed and mailed the distribution check to her chosen bank, relying on its representative to complete the rollover, but the funds were instead placed in a non-IRA certificate of deposit. The IRS concluded that the submitted information supported her claim that the bank's error caused the missed deadline. It granted the waiver and gave her 60 days from the ruling letter's issuance to contribute the amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement for the distribution of Amount A from IRA X?
• Outcome: approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), 408(d)(3)(A), 408(d)(3)(B), 408(d)(3)(D), 408(d)(3)(I), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201029022

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

COMMISSIONER
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

APR 27 2010

UIL No. 408.03-00

SE:T:EP:RA:T4

Legend:

Taxpayer A =
Amount A =
IRA X =

Bank C =

Insurance Company D =
State A =
State B =
Date 1 =
Date 2 =
Date 3 =
Date 4 =

Dear

This is in response to your request dated , as supplemented by correspondence dated , , and , 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”).

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

Taxpayer A, age 67, represents that, on Date 3, following the death of her husband on Date 1, she received a check issued on Date 2 for Amount A. Taxpayer A represents that Amount A was the balance of Taxpayer A’s deceased husband's flexible annuity account, IRA X. Taxpayer A alleges that a rollover of Amount A was not made due to an error by Bank C.

Taxpayer A, who lives in State A, chose Bank C, located in State B, to handle the rollover of her deceased husband’s annuity account, rather than a bank close to where she lived, because Bank C was her “hometown bank” where Taxpayer A and her husband had lived for many years prior to their retirement. On Date 3, Taxpayer A telephoned a representative of Bank C and told her that she wished to roll over her husband’s annuity account into an IRA. As instructed by the representative of Bank C, Taxpayer A endorsed the check and mailed it to Bank C. Prior to her husband’s death, Taxpayer A did not handle any of their finances or pay any household bills, and had no knowledge of investments. As a result, she relied on the representative of Bank C to accomplish the rollover of Amount A properly, as Taxpayer A had intended. However, on Date 4, Amount A was placed in a non-IRA certificate of deposit with Bank C. Taxpayer A assumed that everything had been handled correctly and that a proper rollover had been made until she received a Form 1099-R from Insurance Company D.

Based on the facts and representations, you request a ruling that the Internal Revenue Service (the “Service”) waive the 60 day rollover requirement with respect to the distribution of Amount A.

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

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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 and 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 (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 her assertion that her failure to accomplish a timely rollover was due to an error by Bank C.

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 A from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount A 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 A 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.

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201029022

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 (ID No. ) at ( ) . Please address all correspondence to

Sincerely yours,

[illegible]
Laura B. Warshawsky, Manager
Employee Plans Technical Group 4

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose

CC: