PLR 1038017: IRS waived the 60-day rollover deadline after a financial institution error

Plain-English summary

A taxpayer intended to transfer an IRA into another IRA, but a financial institution's paperwork error sent the funds to a non-IRA account instead. The taxpayer did not use the funds for another purpose and asked the IRS to waive the 60-day rollover deadline. The IRS granted the waiver under IRC § 408(d)(3)(I), allowing the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover deadline after a financial institution error sent the funds to a non-IRA account?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3), 408(d)(3)(I), and 72

Full text (IRS public release)

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

201038017

TAX EXEMPT AND

JUL 01 2010

Uniform Issue List 408.03-00

ox ' —
eee SET: EP. RA TY
XXXXX

Legend:

Taxpayer A = xxxxx

IRA X = Xxxxx

IRA Y = xxxxx

Account Z = xxxxx

Financial Institution D = xxxxx

Financial Institution E = xxxxx

Individual B = xxxxx

Amount N = xxxxx

Date 1 = xxxxx

Date 2 = xxxxx

Dear XXXxx:

This is in response to a letter dated March 31, 2010, submitted on your behalf, as
supplemented by correspondence dated June 1 and 8, 2010, requesting a letter
ruling waiving the 60-day rollover requirement contained in section 408(d)(3) of
the Internal Revenue Code (“Code”).

The following facts and representations in support of the above request are
submitted under penalties of perjury:

Page 2

Taxpayer A, age __, represents that on Date 1, he intended to effect a trustee-to-
trustee transfer of Amount N from IRA X into an IRA at Financial Institution E.
Taxpayer A asserts that, due to error by one or more employees of Financial
Institution E, Amount N was not rolled over timely into another IRA. Taxpayer A
further asserts that Amount N has not been used for any purpose and remains
deposited with Financial Institution E.

Taxpayer A maintained IRA X at Financial Institution D. On Date 1, Taxpayer A
hired Individual B, a financial advisor at Financial Institution E, to handle his
financial planning. On that date, Taxpayer A, in addition to signing new account
forms, signed account transfer forms for the purpose of transferring Amount N
from IRA X to IRA Y, which Taxpayer A had established subsequent to Date 1
but prior to Date 2 at Financial Institution E.

Due to a paperwork error by Financial Institution E, which Individual B failed to
notice, Individual B entered incorrect account information on the transfer forms.
This error resulted in Amount N being deposited on Date 2 into Account Z, a non-
IRA investment account, which Financial Institution E maintained on behalf of
Taxpayer A.

Financial Institution E assisted Taxpayer A to file this ruling request for waiver of
the 60-day rollover period and paid the applicable user fee. Also, in a letter
addressed to the Service, Financial Institution E has confirmed that its personnel

made errors which caused the proceeds from IRA X to be transferred to a non-
IRA account.

It is represented that Amount N does not include any amounts which Taxpayer A
was required to take as a minimum distribution from IRA X for the applicable tax
year.

Based on the above facts and representations, you request a ruling 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 N from
IRA X.

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) does not apply
to any amount paid or distributed out of an IRA to the individual for whose benefit
the IRA is maintained if--

XXXXX
Page 3 201038017
(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) 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), 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 trustee-to-
trustee transfer of Amount N of IRA X was due to error by a financial institution.

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

[illegible]

N from IRA X. Taxpayer A is granted a period of 60 days from the issuance of
this ruling letter to contribute Amount N 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 N 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 ruling assumes that IRA X satisfied the qualification requirements of section
408 of the Code at all times relevant to this transaction.

This ruling 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 xxxxx, |.D. # xxxxx, by
telephone at xxxxx. Please address all correspondence to SE:T:EP:RA:T4.

Sincerely yours,

[signature illegible]

Laura B. Warshawsky, Manager
Employee Plans Technical Group 4

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