PLR 201208041: IRS waives the 60-day rollover deadline after a financial institution error

Plain-English summary

The IRS waived the 60-day rollover requirement for two married taxpayers whose financial institution mistakenly deposited their IRA distributions into non-IRA accounts. The taxpayers had delivered the checks to the institution within the same week and had not used the amounts for another purpose. The IRS granted 60 days from the ruling date to contribute the amounts to rollover IRAs, subject to the other requirements of IRC § 408(d)(3). The ruling did not authorize rollover of amounts required to be distributed under § 401(a)(9).

Ruling snapshot

• Question: Could the taxpayers receive a waiver of the 60-day IRA rollover deadline?
• Outcome: Approved, with 60 days from issuance to complete the rollovers.
• Key authorities: IRC §§ 72, 401(a)(9), and 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

DEC 01 2011

201208041

Uniform Issue List: 408.03-00

T:EP:RA:T3

Legend:

Taxpayer A =

Taxpayer B =

IRA X =

IRA Y =

Amount A =

Amount B =
Date 1 =
Date 2 =
Date 3 =

Financial —
Institution A

Financial
Institution B

Individual 1 =

Dear

This is in response to your request dated May 23, 2011, as supplemented by correspondence dated November 9, 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 65, and Taxpayer B, age 64, married and filing a joint income tax return, represent that they received distributions from IRA X and IRA Y totaling Amount A and Amount B, respectively. Taxpayer A and Taxpayer B state that their failure to accomplish rollovers within the 60-day period prescribed by section 408(d) of the Code was due to an error committed by Financial Institution B which led to the placement of Amount A and Amount B in two non-IRA accounts. Taxpayer A and Taxpayer B further assert that neither Amount A nor Amount B has been used for any

other purpose.

Taxpayer A and Taxpayer B represent that on Date 1, they received distributions of Amount A and Amount B from Financial Institution A, with the intent to establish rollover IRAs at Financial Institution B. Taxpayer A and Taxpayer B took distribution of Amount A and Amount B in the form of personal checks and the same week Taxpayer A delivered them in person to Financial Institution B to be deposited into rollover IRAs. Taxpayer A followed up in writing shortly thereafter with Individual 1, a vice president of Financial Institution B, to ensure that the checks were properly deposited. Taxpayer A and Taxpayer B did not discover that Amount A and Amount B had been deposited into non-IRA accounts until after receiving a Notice from the Internal Revenue Service on

Date 2.

On Date 3, Individual 1 provided documentation indicating that Financial Institution B incorrectly deposited Amount A and Amount B into non-IRA accounts.

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 and Amount 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.

Page 3 201208041

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)(E) of the Code provides that the rollover provisions of section 408(d) do not apply to any amount required to be distributed under section 408(a)(6).

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 and Taxpayer B is consistent with their assertion that their failure to accomplish timely

• 201208041

Page 4

rollovers of Amount A and Amount B was caused by an error committed by Financial Institution B.

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, and Amount B from IRA Y, respectively. Taxpayer A and Taxpayer B are granted a period of 60 days from the issuance of this ruling letter to contribute Amount A and Amount B to their respective Rollover IRA accounts. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contributions, Amount A and Amount B will be considered rollover contributions 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 taxpayers 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 in accordance with Form 2848 on file in this office.

If you wish to inquire about this ruling, please contact at Please address all correspondence to SE:T:EP:RA:T3.

Sincerely,

Laura B. Warshawsky, Manager,
Employee Plans Technical Group 3

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

cc: