PLR 201133014: IRS waives the 60-day deadline for an IRA rollover

Plain-English summary

An individual received a partial IRA distribution and missed the 60-day rollover deadline after a financial advisor deposited the funds into a joint non-IRA account. The taxpayer represented that the funds had not been used for another purpose and that the mistake resulted from the advisor's error. The IRS waived the requirement and gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA, provided the other section 408(d)(3) requirements were met. The ruling did not authorize rollovers of amounts required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover requirement after the funds were deposited into a non-IRA account?
• Outcome: Approved
• Key authorities: IRC §§ 72, 401, 408, and 6110; 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

MAY 27 2011
XXXXXXKXKKXKXKX
XXXXXXKXKXXXXX
XXXXXXXXXXXXX _
[illegible] T:EP:RA:T2
Legend:
Taxpayer A = XXXXXXXXXXXXKX
Financial Institution A = XXXXXXXXXXXXKX
Financial Institution B = XXXXXXXXXXXXKX
IRA X = XXXXXXXXXXXKX
Account Z = XXXXXXXXXXXKX
Form A = XXXXXXXXXXXXX
Financial Advisor G = XXXXKXXXXXXXXKX
Amount B = XXXXXXKXXXKXKKXK
Date 1 = XXXXXXXXXXKXXKX
Date 2 = XXXXXXXXXXKXXK
Date 3 = XXXXXXXXXXXKX
Date 4 = XXXXXXXXXKKXXX
Dear XXXXXXXXXXXKXX:

This letter is in response to your request dated July 13, 2010, as supplemented by correspondence dated October 14, 2010, October 29, 2010, December 17, 2010, January 25, 2011, March 15, 2011, and March 17, 2011, submitted on your behalf by your authorized representative, 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 [illegible] represents that on Date 1, he received a partial distribution totaling Amount B from IRA X maintained at Financial Institution A. Taxpayer A asserts that his failure to accomplish a rollover of Amount B, within the 60-day period prescribed by section 408(d)(3) was due to an error made by Financial Advisor G of Financial Institution B. Taxpayer A also represents that Amount B has not been used for any other purpose.

Taxpayer A asserts that he wanted to diversify his portfolio into a more conservative savings vehicle and that it was his intention to roll over Amount B into another non-taxable account. Taxpayer A, inexperienced in financial matters, communicated his intention to Financial Advisor G, a person he had relied upon for over 15 years to handle all his financial matters. Financial Advisor G suggested a conservative investment that would not have adverse tax consequences. He prepared Form A which Taxpayer A signed on Date 2 believing that he was transferring Amount B to a rollover IRA. Taxpayer A relied on Financial Advisor G to roll over Amount B into a rollover IRA at Financial Institution B. Instead, on Date 3, Financial Advisor G incorrectly deposited Amount B into Account Z, a joint non-IRA account maintained at Financial

Institution B.

Taxpayer A represents further that he believed that Account Z was in an IRA account and was unaware of the incorrect deposit error until Date 4. Documentation provided indicates that Financial Advisor G incorrectly deposited Amount B 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 contained in section 408(d)(3) of the Code with respect to the distribution of Amount B 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:

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(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 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 B, which resulted in Amount B being deposited into Account Z, a non-IRA account.

Therefore, pursuant to section 408(d)(3)(B) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount B,

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from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount B 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 B 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 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.

A copy of this letter is being sent to your authorized representative pursuant to a Power of Attorney on file in this office.

If you wish to inquire about this ruling, please contact XXXXXXXXXXXXX (ID XX- XXXXX) at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely,

Donzell Littlejohn, Manager
Employee Plans Technical Group 2

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