PLR 201150039: IRS waives the 60-day deadline for part of an IRA rollover

Plain-English summary

An individual received a distribution from an IRA and placed part of it into a non-IRA account after receiving inadequate rollover instructions from a financial company employee. The IRS determined that the failure to complete the rollover within 60 days was caused by the company's failure to provide adequate advice. It waived the 60-day requirement for the specified portion of the distribution under section 408(d)(3)(I). The taxpayer received 60 days from the ruling date to roll over no more than that amount to an eligible retirement plan, provided the other rollover requirements were met.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover requirement for the specified portion of the distribution?
• Outcome: approved
• Key authorities: IRC §§ 408(d)(3) and 72; Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224 201150039

TAX EXEMPT AND SEP 21 2011

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

TEP:RA:TI

Legend:

Taxpayer A
IRA B
Company C
Account D
Amount 1

Amount 2

Dear

This letter is in response to a request for a letter ruling dated January 29, 2011, as modified and supplemented by additional correspondence dated March 31, 2011, in which you have applied for 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 ___, represents that he received a distribution from IRA B totaling Amount 1. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to the failure of Company C to provide adequate advice and instructions.

Taxpayer A with the assistance of an employee of Company C, closed IRA B, received a distribution of Amount 1 and deposited Amount 2, a portion of Amount 1, into Account D, a non-IRA account. Company C states, in a letter, that their employee should have informed Taxpayer A that he needed to do a transfer of funds to another financial institution, or rollover to another institution.

201150039

Taxpayer A became aware of the improper handling of the distribution from IRA B when he received the 2010 Form 1099-R from Company C showing Amount 1 as taxable income. Taxpayer A further represents that Amount 2 remains in Account 2.

Based on the above facts and representations, you request a ruling that the Service waive the 60-day rollover requirement contained in section 408(d)(3) of the Code with respect to the distribution of Amount 2.

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 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.

201150039

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 assertions and accompanying documentation are consistent with Taxpayer A's claim that his failure to roll over Amount 2 within the requisite 60 days was caused by the failure of Company C to provide adequate advice and instructions.

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 2. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to roll over no more than Amount 2 to an eligible retirement plan such as an IRA provided all other requirements of section 408(d)(3), except the 60-day requirement, are met with respect to such contribution. Provided no more than Amount 2 is contributed to an eligible retirement plan, within 60 days from the issuance of this ruling letter, the contribution will be considered a rollover contribution within the meaning of section 408(d)(3).

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 wish to inquire about this ruling, please contact

at

Sincerely yours,
Carlton A. Watkins

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437