PLR 201040041: The IRS waived the 60-day IRA rollover requirement

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who moved a distribution from an IRA into an account at a real estate limited partnership that could not legally serve as an IRA custodian. The taxpayer and financial advisor believed the funds had been transferred correctly, and the taxpayer represented that the money had not been used for another purpose. The IRS gave the taxpayer 60 days from the ruling date to contribute the amount to an eligible retirement plan. The amount will count as a rollover only if all other requirements of IRC § 408(d)(3) are met. The ruling is limited to the specific taxpayer and amount 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

201040041

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 15 2010

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

• Legend:

Taxpayer = **

IRA A = **

Amount 1 = $ **

Financial Institution A = **

Financial Institution B = **

Dear:

This is in response to your request dated **, 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 **, represents that he received a distribution from IRA A totaling Amount 1. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to Financial Institution B’s incorrect assertion that it could properly handle IRA accounts. Taxpayer A further represents that Amount 1 has not been used for any other purpose.

Taxpayer represents that he, in consultation with his financial advisor at Financial Institution A, prepared to move funds from Financial Institution A to Financial Institution B in order to diversify the Taxpayer’s investments. Financial Institution B, a real estate limited partnership, assured the Taxpayer that they could accept IRA funds and the Taxpayer presumed, therefore, that Financial Institution B could serve as an IRA custodian and properly title the Taxpayer's investment as an IRA account. Taxpayer

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consulted with and entrusted his financial advisor to facilitate a trustee-to-trustee transfer between Financial Institution A and Financial Institution B. The funds (Amount 1) were moved in February, 2008, to an investment account with Financial Institution B which was not a qualified tax-deferred account. Only when filing his 2008 tax return did the Taxpayer become aware that the funds were not moved correctly. The Taxpayer’s advisor and Financial Institution B were unable to correct the mistake within the time prescribed by section 408(d)(3) of the Code because Financial Institution B could not legally serve as an IRA custodian.

Based on the above facts and representations, you request a ruling that the Internal Revenue Service (“Service”) waive the 60-day rollover requirement with respect to Amount 1 contained in section 408(d)(3) of the Code in this instance.

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 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.

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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 is consistent with his assertion that his failure to accomplish a timely rollover was caused by the failure of his financial institutions and advisor to move the funds to a properly qualified account.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-day rollover requirement with respect to Amount 1. Taxpayer is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 1 into an eligible retirement plan. 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 1 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 ** (Identification Number **) at () -. Please address all correspondence to **.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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