PLR 1042041: IRS waived the 60-day IRA rollover deadline after a financial institution's error

Plain-English summary

The IRS considered a request to waive the 60-day deadline for rolling an IRA distribution into an IRA. The taxpayer transferred the distribution to a nonqualified account after receiving incorrect information about the final day of the rollover period. The taxpayer then attempted to redeposit the funds, but the financial institution was closed, so the redeposit occurred one day late. The IRS found that the financial institution's error caused the missed deadline and waived the requirement under IRC § 408(d)(3)(I), giving the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement when incorrect information and a financial institution closure caused a one-day delay?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408(d)(3)(A), 408(d)(3)(D), 408(d)(3)(I), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

201042041

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 26 2010

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:

Taxpayer A = **
IRA A = **
Account 1 = **
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 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 an error on the part of Financial Institution A.

Taxpayer A represents that he received a distribution of Amount 1 from individual
retirement account (“IRA”) A maintained with Financial Institution 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 an error on the part of Financial Institution A.

Amount 1 was distributed from IRA A on **, and transferred by wire to
Account 1, a nonqualified account, with Financial Institution B. Taxpayer A was
misinformed by Financial Institution A that ** was the final day of the 60-day

201042041

rollover period. Taxpayer A attempted to redeposit Amount 1 in IRA A on **,
not realizing that ** was 61 days from the original date of distribution.
Financial Institution A, however, was closed for business that day, so Taxpayer A
returned to the financial institution on **, and redeposited Amount 1 in IRA A.

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.

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.

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

201042041

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
on the part of Financial Institution A.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the
60-day rollover requirement under section 408(d)(3)(A) with respect to Amount 1.
Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount 1 to 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 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