PLR 1136037: IRS waives the 60-day IRA rollover deadline

Plain-English summary

An IRA owner received a distribution and intended to roll it into another IRA, but a financial advisor deposited it into a non-IRA account. The IRS found that the missed 60-day deadline resulted from the financial advisor's error and that the distributed amount had not been used for another purpose. It waived the deadline and gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA, subject to the other section 408(d)(3) requirements. The ruling expressed no opinion on whether the IRA otherwise satisfied section 408.

Ruling snapshot

• Question: Whether the IRS should waive the 60-day rollover requirement for the IRA distribution.
• Outcome: Approved.
• Key authorities: IRC §§ 72, 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 201136037

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

Uniform Issue List: 408.03-00

JUN 15 2011

Legend:

Taxpayer A = ***

Financial Institution B = ***

Financial Institution C = ***

Financial Advisor D = ***

IRA X = ***

Account Y = ***

Year Z = ***

Date 1 = ***

Date 2 = ***

Date 3 = ***

Amount A = ***

Dear ***:

This letter is in response to your request dated January 6, 2011, as
supplemented by correspondence dated April 14, 2011, and April 19, 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 __, represents that she received a distribution of Amount A from
her Individual Retirement Account (IRA), IRA X, at Financial Institution B. She asserts
that her failure to accomplish a rollover of Amount A within the 60-day period prescribed
by section 408(d)(3) was due to errors made by Financial Advisor D of Financial
Institution C. Taxpayer A represents that Amount A has not been used for any other
purpose.

Taxpayer A represents she was looking for a more conservative option for her
IRA funds. On Date 1, she met with Financial Advisor D to discuss opening an IRA at
Financial Institution C. On Date 2, Taxpayer A completed a distribution request form for
Financial Institution B, requesting the distribution of Amount A from IRA X. However,
contrary to Taxpayer A's instructions, Financial Advisor D of Financial Institution C
deposited Amount A into Account Y, a non-IRA account. Taxpayer A reported the
distribution of Amount A as a rollover on her tax return for Year Z. It was not until Date
3 in the following year, when Taxpayer A attempted to roll over additional funds into
Account Y, that she discovered that Financial Advisor D had not established Account Y
as an IRA.

Documentation provided shows that Financial Advisor D incorrectly deposited
Amount A into Account Y, a non-IRA account. Specifically, Financial Advisor D has
provided a signed statement admitting that she failed to open an IRA on behalf of
Taxpayer A as had been requested by Taxpayer A.

Based on the foregoing facts and representations, you request a ruling that the
Internal Revenue Service (the Service) waive the 60-day rollover requirement with
respect to the distribution of Amount A from IRA X at Financial Institution B.

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, 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)).

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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.

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 presented and documentation submitted by Taxpayer A are
consistent with her assertion that her failure to accomplish a timely rollover was caused
by errors made by Financial Advisor D of Financial Institution C, which resulted in
Amount A being deposited into Account Y, 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 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 rollover contribution within the meaning of
section 408(d)(3) of the Code.

This letter expresses no opinion as to whether the IRA described herein satisfied
the requirements of section 408 of the Code.

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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 ***. 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

CC: ***