PLR 1206026: IRS waived the 60-day IRA rollover requirement after a financial institution error

Plain-English summary

The IRS considered a taxpayer's request to waive the 60-day deadline for rolling a distribution from an IRA into another IRA. The taxpayer intended to complete the rollover, but a financial institution's representative opened a non-qualified account and deposited the funds there instead. The IRS found that the failure resulted solely from the financial institution's error, and it waived the deadline under section 408(d)(3)(I), giving the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA. The ruling depends on the taxpayer meeting the other requirements of section 408(d)(3), and it applies only to the requesting taxpayer.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover requirement caused by a financial institution's error?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

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

November 15, 2011

Uniform Issue List: 408.03-00

201206026

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SE:T:EP:RA:T2

Legend:

Taxpayer A ***
Financial

Institution A ***
Financial

Institution B ***
Financial
Institution C ***

IRA X ***
Financial

Advisor G ***
Individual H ***
Amount 1 ***
Account Y ial
Date 1 ***
Date 2 ***

Date 3 ***


Page 2

Dear ***.                                      201206026

This letter is in response to your request dated June 7, 2010, submitted on your behalf
by your authorized representative, as supplemented by written correspondence dated
February 1, 2011, August 30, 2011, and October 3, 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, years old, represents that he received a distribution from IRA X at
Financial Institution A on Date 1 totaling Amount 1 with the intent to rollover Amount 1
into a newly established IRA at Financial Institution B and that his failure to accomplish
a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due
to an error made by Financial Institution C, through its registered representative
Financial Advisor G. Taxpayer A also represents that Amount 1 has not been used for
any other purpose.

Taxpayer A represents that on Date 1, he received a distribution of Amount 1 from

IRA X in the form of a check. Taxpayer A asserts that he held onto the check and did
not redeem it until Date 2. On Date 2, Taxpayer A provided

Financial Advisor G, an employee of Financial Institution C, with information showing
that Amount 1 was distributed from IRA X and requested that Financial Advisor G
rollover Amount 1 into another IRA at Financial Institution B. According to

Taxpayer A, Financial Advisor G failed to realize that IRA X was an IRA account and
instead of establishing another IRA, gave Taxpayer A an application for a non-qualified
account. Taxpayer A asserts that Financial Advisor G erroneously opened a
non-qualified account, Account Y, and, on Date 2, transferred Amount 1 into Account Y,
when Taxpayer A had intended to open a qualified IRA rollover account. Taxpayer A
represents that he believed that Amount 1 was successfully rolled over into an IRA.

Taxpayer A was unaware of the error until Date 3, when he received a tax assessment
notice from the IRS. Taxpayer A then contacted Financial Institution C regarding
Account Y. Taxpayer A submitted a sworn affidavit from Individual H, the Executive
Vice-President of Financial Institution C, stating: (1) Financial Institution C received
qualified funds from Financial Institution A on behalf of Taxpayer A prior to the
expiration of the 60-day rollover period; (2) Taxpayer A followed all procedures
indicated as required by Financial Institution C for deposits of such funds into what
Taxpayer A believed to be an IRA within the 60-day roll-over period (including giving
instructions to deposit the funds into an IRA); and (3) solely due to an error on the part
of Financial Institution C, through its registered representative, Amount 1 was not
deposited into an IRA within the 60-day roll-over period.


Page 3 201206026

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 1 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.

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 section 408(d)(3)(A) 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


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201206026

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, including a
sworn affidavit by Individual H stating that the failure of Amount 1 to be rolled over to an
IRA within the 60-day rollover period was due solely to error by Financial Institution C,
through its registered representative, is consistent with his assertion that his failure to
accomplish a timely rollover was caused by an error made by Financial Advisor G,
which resulted in Amount 1 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 1 from IRA X.
Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount 1 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 1 will be considered a 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, contact *** at ([illegible]) [illegible]. Please
address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Donzell Littlejohn, Manager,
Employee Plans Technical Group 2

201206026

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose

cc: ***
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