PLR 1134026: IRS waives the 60-day IRA rollover deadline after bank error

Plain-English summary

A taxpayer asked the IRS to waive the 60-day deadline for rolling an IRA distribution into another IRA. The taxpayer said bank representatives repeatedly advised her to wait to deposit the distribution check, and the check remained uncashed when the deadline passed. The IRS concluded that the missed deadline resulted from an error by a financial institution and waived the requirement under § 408(d)(3)(I). It gave the taxpayer 60 days from the ruling date to make the rollover, subject to the other rollover requirements. The ruling did not address tax treatment under other Code or regulatory provisions.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement after bank representatives caused the taxpayer to delay the rollover?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408(d)(1), 408(d)(3), and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224 201134026

COMMISSIONER
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

MAY 31 2011

SE:T:EP:RAT:T3

Legend:
Taxpayer A:
IRA X:

Amount M:
Date 1:
Date 2:°
Bank

Bank

Dear

This is in response to your request dated April 13, 2010, as supplemented by
correspondence dated October 14, 2010, March 8, 2011, and March 15, 2011, 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’”).

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 at Bank
. Taxpayer A, age _asserts that on Date 1, she received a distribution of
Amount M from IRA X and that her 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

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an error by a representative of Bank '. Taxpayer A further represents that
Amount M has not been used for any other purpose.

Taxpayer A represents that after IRA X matured she went to Bank with the
intent to rollover Amount M to a rollover IRA. She met with a representative of
Bank and expressed her intention and desire to roll over Amount M into a
certificate of deposit with a reasonable rate of return. During that meeting,
Taxpayer A handed the IRA X distribution check to a representative of Bank ,
but was advised to hold the check and to come back at a later date when the
interest rates offered would be better. Taxpayer A relied on his advice and
returned again within the 60-day period and was told that in the very near future
the rates would increase and to come back at a later date. Taxpayer A returned
three times within the 60-day period and each time was told by a representative

of Bank try again later.

Taxpayer A returned finally on Date 2 which was shortly after the expiration of
the 60-day period and was told by another advisor at Bank that the bank
would not be able to accomplish a rollover of Amount M because the 60-day

period had expired.

Taxpayer A has not cashed the distribution check from IRA X and submitted this
ruling request for a waiver of the 60-day rollover requirement.

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 M.

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

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(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 60" 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)(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 her assertion that her 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 an error by a representative of Bank

Therefore, pursuant to section 408(d)(3)(1) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distribution of Amount
M from IRA X. Pursuant to this ruling letter, Taxpayer A is granted a period of 60
days from the date of the issuance of this letter ruling to make a rollover

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contribution of Amount M to a rollover IRA. Provided all other requirements of
Code section 408(d)(3), except the 60-day requirement, are met with respect to
such contribution, Amount M will be considered a valid 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.

If you have any questions, please contact

Sincerely yours,

Acta P
je Laura B. Warshawsky, Manager

Employee Plans Technical Group 3

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