PLR 1129047: IRS waives the 60-day IRA rollover deadline after an advisor's deposit error

Plain-English summary

The IRS waived the 60-day rollover requirement for an individual whose IRA distribution was mistakenly deposited into a joint non-IRA account. The taxpayer intended to roll the funds into another IRA after receiving advice about investing in a financial program, but the advisor deposited the amount into the wrong account. The IRS found that the failure to complete the rollover on time resulted from the financial advisor's error and that the distributed amount had not been used for another purpose. The taxpayer was given 60 days from the ruling letter to contribute the amount to a rollover IRA, subject to the other rollover requirements. The ruling is directed only to the requesting taxpayer and may not be used or cited as precedent.

Ruling snapshot

• Question: Whether the IRS should waive the 60-day IRA rollover requirement.
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3)(A) 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

APR 28 2011

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SE:T:EP:RA:T3

Legend:
Taxpayer A = XXXXXXXXXXXXXXXX
Financial Institution A = XXXXXXXXXXXXXXXX
Financial Institution C = XXXXXXXXXXXXXXXX
Program D = XXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX
Account Z = XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX
Financial Advisor G = XXXXXXXXXXXXXXXX
Amount A = XXXXXXXXXXXXXXXX
Date 1 = XXXXXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXXXXX

Dear XXXXXX:

This letter is in response to your request dated October 15, 2010, as
supplemented by correspondence dated December 7, and December 20, 2010, in
which you requested 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, age 72, represents that he received a distribution from IRA X
totaling Amount A on Date 1. Taxpayer A asserts that his failure to accomplish a
rollover of Amount A within the 60-day period prescribed by section 408(d)(3) was due
to an error made by Financial Advisor G of Financial Institution A. Taxpayer A also
represents that Amount A has not been used for any other purpose.

Taxpayer A represents that acting on the advice of Financial Advisor G he
initiated a rollover of funds from IRA X to another IRA with Financial Institution C.
Taxpayer A asserts that he was told by Financial Advisor G that he could help him
reach his long-term financial goals by investing in Program D. Taxpayer A provided
Financial Advisor G with information showing that Amount A was held in IRA X.
Taxpayer A relied on Financial Advisor G to roll over Amount A into a rollover IRA at
Financial Institution C. However, on Date 2, Financial Advisor G incorrectly deposited
Amount A into Account Z, a joint non-IRA account maintained at Financial Institution C.
Taxpayer A represents that he believed that Account Z was in an IRA account.
Documentation provided indicates that Financial Advisor G incorrectly deposited
Amount A to Account Z, a non-IRA account.

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

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,

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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 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 an error made by Financial Advisor G of Financial Institution A, which resulted in
Amount A being deposited into a non-IRA account.

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 of Amount A,
from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling
letter to contribute Amount A 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 A will be considered a valid rollover contribution within the
meaning of section 408(d)(3) of the Code.

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This ruling does not authorize the rollover of any amounts that are required to be
distributed by section 401(a)(9) 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 XXXXXXXXXXXX, ID XX-
XXXXX at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T.

Sincerely,

Ada Perry
for
Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

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