PLR 201146025: IRS waives a 60-day rollover deadline after an institution's error

Plain-English summary

A taxpayer asked the IRS to waive the 60-day deadline for rolling an IRA annuity distribution into a rollover IRA. The taxpayer intended to complete the rollover, but the receiving financial institution deposited the check into a non-IRA account and the error was discovered only after the deadline. The IRS found that the financial institution's error supported relief under IRC § 408(d)(3)(I) and granted 60 days from the ruling letter to contribute the amount to a rollover IRA. The ruling did not authorize rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: May the taxpayer complete the rollover after the 60-day period because a financial institution deposited the distribution into a non-IRA account by mistake?
• Outcome: Approved, with 60 days from the ruling letter to make the contribution.
• Key authorities: IRC §§ 408, 401, and 6110; Rev. Proc. 2003-16.

Full text (IRS public release)

TAX EXEMPT AND
GOVERNMENT ENTITIES

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

201146025

DIVISION

Uniform Issue List: 408.03-00

AUG 26 2011
XXXXXXXXXXAXXX

[illegible]
[illegible]

Legend:
Taxpayer A = AXXXXXXXXXXKK
Financial Advisor S = XXXXXXXXXXXXX
Financial Institution A = XXXXXXXXXXXXX
Financial Institution R = XXXXXXXXXXXXK
IRA Annuity X = XXXXXXXXXXXXX
XXXXXXXXKXXXXX
XXXXXXXXXXXXX
Amount A = XXXXXXXXXXXXX
Form A = XXXXXXXXXXXXX
Date 1 = XXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXX
Dear XXXXXXXXXXXXX:

This letter is in response to your request dated September 13, 20 _, 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”).

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

Taxpayer A, age _, represents that he received a distribution from IRA Annuity X totaling Amount A. 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

XXXXXXXXKXKXXXX

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made by Financial Advisor S of Financial Institution R. Taxpayer A further represents that Amount A has not been used for any other purpose.

Taxpayer A represents that he maintained IRA Annuity X at Financial Institution A until Date 1. On that day, acting on the advice of Financial Advisor S, he surrendered IRA Annuity X, intending to roll the full amount into a rollover IRA at Financial Institution R. To effectuate the transaction, a check from Financial Institution A in Amount A made payable to Financial Institution R for the benefit of Taxpayer A was processed by Financial Institution R. Financial Institution R deposited the check into a non-IRA account. Taxpayer A did not become aware that the distribution from IRA Annuity X had been deposited into a non-IRA account until Date 2, which was after the 60-day rollover period had passed. Once Taxpayer A became aware of the error, he contacted Financial Advisor S who acknowledged that his office had deposited Amount A into a non-IRA account in error. Documentation provided indicates that Financial Institution R incorrectly deposited Amount A into 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 Annuity 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, 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

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201146025

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 his assertion that his failure to accomplish a timely rollover was caused

by an error made by Financial Institution R, 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 distributions 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.

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.

XXXXXXXXXXKXKXK

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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,
[illegible]

[illegible], Manager
Employee Plans Technical Group 2

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