IRS determination 201205021: 60-day IRA rollover deadline waived

Plain-English summary

The IRS waived the 60-day deadline for part of an IRA distribution after a financial advisor incorrectly completed rollover paperwork. The taxpayer intended to divide the distribution among three rollover IRAs, but one portion was deposited into a non-IRA account because the correct form box was not checked. The taxpayer represented that the amount had not been used for another purpose. The IRS gave the taxpayer 60 days from the ruling date to contribute that amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: May the IRS waive the 60-day IRA rollover requirement when a financial advisor's paperwork error prevented a timely rollover?
• Outcome: Approved.
• Key authorities: IRC § 408(d)(3); 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

201205021

Uniform Issue List: 408.03-00

[illegible redacted header text]

[illegible handwritten notation]

Legend:
Taxpayer A = XXXXXXXXXXXXXX
Financial Institution A = XXXXXXXXXXXXX
Financial Institution B = XXXXXXXXXXXXX
Financial Institution C = XXXXXXXXXXXXX
Financial Institution D = XXXXXXXXXXXXX.
Financial Institution E = XXXXXXXXXXXXX
Account Z = XXXXXXXXXXXXX
XXXXXXXXXXXXXX
Financial Advisor G = XXXXXXXXXXXXX
Amount A = XXXXXXXXXXXXX
Amount B = XXXXXXXXXXXXX
Amount C = XXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXX
Date 1 = XXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXX
XXXXXXXXXXXXXX
IRA Z = XXXXXXXXXXXXX
XXXXXXXXXXXXXX

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Dear XXXXXXXXXXXXX:

This letter is in response to your letter which was dated March 11, 2011, as supplemented by correspondence dated July 20, 2011, submitted on your behalf by your authorized representative, 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, age 70, represents that he received a distribution from IRA X totaling Amount A on Date 1. Taxpayer A asserts that his failure to accomplish a rollover of Amount D, a portion of Amount A, within the 60-day period prescribed by section 408(d)(3) was due to an error made by Financial Advisor G of Financial Institution A. Taxpayer A also represents that Amount D has not been used for any other purpose.

Taxpayer A represents that he maintained IRA X at Financial Institution B until Date 1; and that it was his intention to roll over Amount A into three separate IRAs. Taxpayer A represents further that he relied on Financial Advisor G to assist him in completing the appropriate forms to accomplish the transfers from IRA X to the three IRAs. Amount B and Amount C were successfully rolled over to rollover IRAs at Financial Institution C and Financial Institution D, respectively. Taxpayer A asserts that he intended to roll over the remainder of IRA X, a sum totaling Amount D, into a new IRA account at Financial Institution E. However, on Date 2, Financial Advisor G incorrectly completed the rollover forms by failing to check the correct box to indicate Taxpayer A's intention to establish a rollover IRA with Company A. As a result of Financial Advisor G's failure to mark the correct box, Amount D was deposited into a non-IRA account. Documentation provided indicates that Financial Advisor G's office incorrectly completed paperwork which caused Financial Institution E to deposit Amount D 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 D 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.

201205021

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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.

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 due to an error by Financial Advisor G of Financial Institution A.

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 D, from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling

201205021

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letter to contribute Amount D 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 D 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.

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