PLR 201103058: IRS waives the 60-day IRA rollover deadline after an advisor's error

Plain-English summary

The IRS waived the 60-day deadline for an individual retirement account rollover. The taxpayer had withdrawn an amount from an IRA and instructed a financial advisor to transfer it back before the deadline, but the advisor failed to follow the instructions. The taxpayer did not use the amount for another purpose, and the IRS found that the failure resulted from the advisor's error. The ruling gave the taxpayer 60 days from the date of the letter to contribute an equal amount to an IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because a financial advisor failed to follow the taxpayer's instructions?
• Outcome: Approved
• Key authorities: IRC §§ 72 and 408(d)(1), 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

OCT 27 2010

[illegible]

Legend:
Taxpayer A:

IRA X:

Account Y:

Financial Institution M:

Date 1:

Date 2:

Financial Advisor P:

Year 1:

Month 11:

Amount M:

Dear [illegible]:

This is in response to letters dated April 5, 2010, and June 29, 2010, submitted on your behalf by your authorized representative, 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”).

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

Taxpayer A maintained an Individual Retirement Account (IRA), IRA X, with Financial Institution M. Taxpayer A, age 55, asserts that on Date 1, Taxpayer A withdrew Amount M from IRA X, held by Financial Institution M. Taxpayer A asserts that his failure to accomplish a rollover of Amount M within the 60-day period prescribed by section 408(d)(3) of the Code was due to the error of Financial Advisor P. Taxpayer A has not has not used Amounts M for any other purposes.

On Date 1 Taxpayer A, in consultation with Financial Advisor P, requested and completed a transfer of Amount M from IRA X to Account Y.

During Month 11, which time was during the 60 day rollover period, Taxpayer A twice gave instructions to Financial Advisor P, an original request and a second request a week later, to transfer Amount M from Account Y back into IRA X to complete a rollover of Amount M before the expiration of the 60-day period in the following month. Taxpayer A has submitted documentation which shows that funds were available in Account Y to accomplish a rollover of Amount M within the 60-day period.

Taxpayer A submitted a letter dated Date 2 from Financial Advisor P in which Financial Advisor P admitted that he unintentionally failed to follow Taxpayer A's request and caused Taxpayer A to miss the 60-day rollover period.

Taxpayer A did not discover the mistake until the preparation of his Year 1 federal income tax return.

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

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Section 408(d)(3)(E) of the Code provides that the rollover provisions of section 408(d) do not apply to any amount required to be distributed under section 408(a)(6).

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)(E) of the Code provides that the rollover provisions of section 408(d) do not apply to any amount required to be distributed under section 408(a)(6).

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

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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 rollover of Amount M within the 60-day period prescribed by section 408(d)(3) of the Code was due to the error of Financial Advisor P.

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 to Taxpayer A of Amount M. Pursuant to this ruling letter, Taxpayer A is granted a period of 60 days measured from the date of the issuance of this letter ruling to make a rollover contribution of an amount equal to Amount M to an IRA (or IRAs) described in Code section 408(a). Provided all other requirements of Code section 408(d)(3), except the 60-day requirement, are met with respect to such IRA contribution, the contribution will be considered a rollover contribution within the meaning of Code section 408(d)(3).

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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative.

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.

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If you wish to inquire about this ruling, please contact

Sincerely yours,

[illegible signature]

Frances V. Sloan, Manager
Employee Plans Technical Group 3

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