PLR 1129048: 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 non-IRA account. The taxpayer intended to roll the full distribution into another IRA, but a financial advisor's office completed the forms incorrectly and deposited the check into a non-IRA account. The IRS found that the failure to complete the rollover on time resulted from the 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

APR 28 2011

Uniform Issue Code: 408.03-00

XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX

SE:T:EP:RA:T3

Legend:
Taxpayer A = XXXXXXXXXXXX
Financial Advisor T = XXXXXXXXXXXX
IRA X = XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
Account Z = XXXXXXXXXXXX
XXXXXXXXXXXX
Amount A = XXXXXXXXXXXX
Financial Institution E = XXXXXXXXXXXX
Financial Institution R = XXXXXXXXXXXX
Date 1 = XXXXXXXXXXXX
Date 2 = XXXXXXXXXXXX
Date 3 = XXXXXXXXXXXX
Date 4 = XXXXXXXXXXXX

Dear XXXXXXXX:

This is in response to your ruling request dated December 20, 2010, and supplemented
by correspondence dated February 25, 2011, March 1, 2011, and April 26, 2011, in

XXXXXXXXXXXX
Page 2

which you request a waiver of the 60-day rollover requirement contained in section
408(d)(3) of the Internal Revenue Code (“Code”).

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

Taxpayer A, age 75, represents that he received a distribution from IRA X totaling
Amount A. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day
period prescribed by section 408(d)(3) of the Code was due to an error made by

Financial Advisor T. Taxpayer A further represents that Amount A has not been used for
any other purpose.

Taxpayer A represents that on Date 1, acting on the advice of Financial Advisor T,
Taxpayer A surrendered IRA X, intending to roll the full amount into a rollover IRA at
Financial Institution R. On Date 2, a check from Financial Institution E in Amount A
made payable to Taxpayer A c/o Financial Institution R, was received by Financial
Advisor T who processed the check. Financial Advisor T’s office wrote Taxpayer A’s
personal account number on the check and deposited the check into Account Z, a non-
IRA account on Date 3. Taxpayer A did not become aware that the distribution from
IRA X had been deposited into a non-IRA account until Date 4, which was after the 60-
day rollover period had passed. Once Taxpayer A became aware of the error, he
contacted Financial Advisor T who acknowledged that his office had deposited Amount
A into Account Z, a non-IRA account in error.

Documentation provided indicates that Financial Advisor T’s office incorrectly completed
forms which caused Financial Institution R to deposit Amount A into 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 with respect to the distribution of
Amount A.

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 account is maintained if:

XXXXXXXXXXXX
Page 3

1) 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

2) the entire amount received (including money and 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 one-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.

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) 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 and documentation submitted by Taxpayer A is consistent with his
assertion that his failure to accomplish a timely rollover of Amount A was due to an error
by Financial Advisor T which resulted in Amount A being deposited into a non-IRA
account.

XXXXXXXXXXXX
Page 4

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 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 A will be considered a valid rollover contribution within the meaning
of section 408(d)(3) of the Code.

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 ruling is directed solely to the taxpayer who requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited by others as precedent.

If you wish to inquire about this ruling, please contact XXXXXXX, ID Number XX-XXXX
at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

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

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose