PLR 1041049: 60-day rollover deadline waived after adviser error and medical condition

Plain-English summary

An individual asked the IRS to waive the 60-day deadline for rolling mutual funds from an existing IRA into another IRA. A financial adviser transferred the funds into a non-IRA brokerage account, and the taxpayer did not learn of the mistake during the rollover period because of a serious medical condition, hospitalization, and surgery. The IRS granted the waiver under IRC § 408(d)(3)(I), giving the taxpayer 60 days from the ruling letter to contribute the amount to a rollover IRA, provided the other rollover requirements were met. The ruling was limited to the requesting taxpayer and was not precedent.

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement after a financial institution's error and the taxpayer's medical issues delayed the rollover?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16; IRC § 6110(k)(3)

Full text (IRS public release)

201041049

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 21 2010

Uniform Issue List: 408.03-00

SE:T:EP:RA:TY

Legend:

Taxpayer A =
IRA X =
Financial Advisor C =
Individual D =
Financial Institution M =
Account L =
Amount B =
Date 1 =
Date 2 =
Date 3 =

Dear

This is in response to a letter dated submitted on your behalf
by your authorized representative, as supplemented by correspondence 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.

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Taxpayer A, age 63, represents that his failure to accomplish a rollover of
mutual funds in IRA X, valued at Amount B, to an IRA at Financial Institution M
within the 60-day period prescribed by section 408(d)(3) was due to a mistake
made by Financial Advisor C (an employee of Financial Institution M), in addition
to Taxpayer A’s medical condition during the 60-day rollover period. Taxpayer
also represents that Amount B has not been used for any other purpose.

On Date 1, Taxpayer A, concerned over his recent discovery that he
suffered from a serious medical condition and responding to the urging of
Financial Advisor C, who whom he had consulted for more than five years,
authorized Financial Advisor C to consolidate all of his investment accounts at
Financial Institution M. As part of that effort, Taxpayer A verbally authorized
Financial Advisor C to transfer all of the funds in IRA X (Amount B) to an IRA at
Financial Institution M. Financial Advisor C required no written authorization from
Taxpayer A to transfer the funds. On Date 2, Financial Advisor C transferred the
IRA X funds to Financial Institution M. Because Taxpayer A did not have an IRA
account at Financial Institution M at the time of the transfer, the funds were
deposited into Account L, a non-IRA, individual brokerage account. Following
the transfer, Financial Advisor C never notified Taxpayer A that the funds were
no longer held in an IRA. Taxpayer A, distracted by his recently diagnosed
medical condition, as well as his hospitalization and surgery on Date 3 (which
occurred during the 60-day rollover period) to treat that medical condition, did not
become aware of Financial Advisor C’s error until he sought to transfer his IRA
funds to another financial institution several months after the 60-day rollover
period had expired. Financial Institution M has provided a letter in which
Financial Advisor C and his assistant, Individual D, both acknowledge that
Taxpayer A had verbally requested them to transfer the IRA X funds into an IRA
at Financial Institution M.

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 distributions totaling Amount B contained in section 408(d)(3)
of 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)(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

201041049

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(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.

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 his assertion that his failure to accomplish a timely rollover was
caused by a mistake made by Financial Advisor C (an employee of Financial
Institution M), in addition to his medical condition during the 60-day rollover
period.

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Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service
hereby waives the 60-day rollover requirement with respect to the distributions
totaling Amount B from IRA X. Taxpayer A is granted a period of 60 days from
the issuance of this ruling letter to contribute Amount B 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 B 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.

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 # ) at ( ). Please address all correspondence to

Sincerely yours;

Adria Perry, Manager,
Employee Plans Technical Group 4

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

CC: