PLR 1040039: The IRS waived the 60-day IRA rollover requirement after a bank error

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer whose financial institution mistakenly opened a non-IRA account instead of an IRA account. The taxpayer met with the institution during the rollover period, had not used the distributed amount for another purpose, and the institution admitted its error. The IRS gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA, provided the other rollover requirements were satisfied. The ruling is limited to the taxpayer and distribution described.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover requirement under IRC § 408(d)(3)(I)?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16; IRC § 6110(k)(3)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

201040039

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 14 2010

Uniform Issue List: 408.03-00

SE:T:EP:RA:T2

Legend:

Taxpayer A = ******

IRA X = *******

Financial Institution A = *****

Amount A = ****

Date 1 = **

Date 2 = ***

Date 3 = *****

Dear **:

This is in response to your request dated May 21, 2010 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 55, represents that he received a distribution from IRA X
totaling Amount 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 a mistake made by
Financial Institution A; Taxpayer A further represents that Amount A has not been used
for any other purpose.

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201040039

• On Date 1, Taxpayer A received a distribution from IRA X. On Date 2, a date
within the 60-day rollover period, Taxpayer A met with a representative from Financial
Institution A to open an IRA account. The representative erroneously completed the
paperwork opening a non-IRA account instead of an IRA account. Financial Institution
A has admitted its error in a letter dated Date 3.

Based on the 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 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
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

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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 timely rollover was caused
by an error committed by a representative of Financial Institution A.

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.

If you wish to inquire about this ruling, please contact * at () -*.
Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Donzell Littlejohn, Manager
Employee Plans Technical Group 2

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