PLR 1047028: IRS waived the 60-day IRA rollover deadline after misleading information

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer to roll an IRA distribution into another IRA. A representative of the taxpayer's financial institution incorrectly said that the taxpayer had 90 days to complete the rollover. The taxpayer kept the uncashed check, later deposited it into another IRA, and had not used the funds for another purpose. The IRS granted the waiver based on the taxpayer's reliance on the misinformation and the other facts described in the ruling.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because the taxpayer relied on incorrect information from a financial institution about the rollover period?
• Outcome: approved
• Key authorities: IRC §§ 72, 408(d)(3)(A), and 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

201047028

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 02 2010

Uniform Issue List: 408.03-00

Legend:
Taxpayer A =

IRA B =

Financial Institution C =

IRA D =

Financial Institution E =

Amount 1 =

Dear

This letter is in response to a request for a letter ruling dated March 4, 2010, as
modified and supplemented by additional correspondence dated June 14, and
June 30, 2010, in which you request a waiver of the 60-day rollover requirement
contained in section 408(d)(3) of the Internal Revenue Code ("Code"), regarding
the distribution of Amount 1 from IRA B.

The following facts and representations have been submitted under penalty of
perjury in support of the ruling requested.

Taxpayer A, age _ at the time of the distribution of Amount 1 from IRA B,
asserts that her failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3) of the Code was due to her reliance on
misinformation concerning the 60-day period given her by a representative of
Financial Institution C. Taxpayer A further asserts that Amount 1 has not been
used for any purpose.

Taxpayer A maintained IRA B, an individual retirement account under section
408(a) of the Code, with Financial Institution C. On November [illegible], 200[illegible], Taxpayer
A received a distribution of Amount 1 from IRA B. Soon after receiving the check
for Amount 1, Taxpayer A met with a representative with Financial Institution C to
discuss the amount of time she would have to deposit the check into an IRA.
Taxpayer A represents that this individual indicated she had 90 days to either
reinvest the distribution with Financial Institution C without penalty, or complete
the rollover of Amount 1. The check for Amount 1 was placed in a desk drawer
in Taxpayer A’s home.

Acting on this information, Taxpayer waited until almost the expiration of the
90-day period to complete the rollover of Amount 1. She had been preoccupied
with the unemployed status of herself and her spouse. Also, in mid-December
of 20[illegible], Taxpayer A’s grandmother was diagnosed with cancer, which required
much of Taxpayer A’s attention as well as her traveling cross country in early
January to supervise her grandmother’s medical care. On February 20[illegible],
Taxpayer A discovered the uncashed check and immediately deposited it in IRA
D with Financial Institution E. At this time, Taxpayer A was advised she must
request a waiver of the 60-day rollover period from the Internal Revenue Service.

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

Section 408(d)(1) of the Code provides that, except as otherwise provided in
section 408(d) of the Code, 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 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) of the Code).

201047028

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code
does not apply to any amount described in section 408(d)(3)(A)(i) of the Code
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) of the Code from an IRA which was not
includible in gross income because of the application of section 408(d)(3) of
the Code.

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) of the Code, 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 the documentation submitted by Taxpayer A is
consistent with her assertion that her failure to accomplish a timely rollover of
Amount 1 was due to her reliance on misinformation given her concerning the
60-day period by Financial Institution C.

Therefore, pursuant to Code section 408(d)(3)(I), the Service hereby waives
the 60-day rollover requirement with respect to the distribution of Amount 1 from
IRA B. 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,
contributed to IRA D, 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.

201047028

If you wish to inquire about this ruling, please contact
(ID # ), , at ( ).

Sincerely yours,

Carlton A. Watkins
Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter

Notice of Intention to Disclose, Notice 437