PLR 1227009: IRS waives the 60-day IRA rollover requirement after postal error

Plain-English summary

Two taxpayers received distributions from their IRAs and mailed checks to a financial institution to complete rollovers. The checks were returned after the 60-day rollover period had expired because of a postal error. The taxpayers then deposited the checks into other IRAs and represented that the amounts had not been used for another purpose. The IRS waived the 60-day requirement under § 408(d)(3)(I), provided the other rollover requirements were met. The ruling did not authorize rollovers of amounts required to be distributed under § 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement after postal error caused two rollover checks to be returned late?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

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

201227009

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

APR 11 2012
T:EP:T2A:RA:T2

Uniform Issue List: 408.03-00

XXX
XXX
XXX

Legend:

Taxpayer A = XXX
Taxpayer B = XXX
Financial Institution A = XXX
Financial Institution B = XXX
IRA P = XXX
IRA Q = XXX
IRA X = XXX
IRA Y = XXX
Amount 1 = XXX
Amount 2 = XXX
Date 1 = XXX
Date 2 = XXX
Date 3 = XXX
Date 4 = XXX

Dear XXX:

This letter is in response to your request dated July 19, 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”). Correspondence on December 23, 2011, and January 16,
2012, supplemented the request.

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

Taxpayer A, age 70, represents that on Date 1 he received a distribution from IRA P
totaling Amount 1. Taxpayer B, age 70, represents that on Date 1, she received a
distribution from IRA Q totaling Amount 2. Taxpayers A and B assert that their failure to
accomplish rollovers of Amounts 1 and 2 within the 60-day period prescribed by section
408(d)(3) of the Code was due to financial institution error. Taxpayers A and B also
represent that Amounts 1 and 2 have not been used for any other purpose.

Taxpayer A represents that on Date 1 he took a distribution of Amount 1 from IRA P in
the form of a distribution check paid to the order of Financial Institution 2 for the benefit
of Taxpayer A. Taxpayer A asserts that he intended to deposit the distribution check
into IRA X at Financial Institution B. Similarly, Taxpayer B represents that on Date 1 she
took a distribution of Amount 2 from IRA Q in the form of a distribution check paid to the
order of Financial Institution 2 for the benefit of Taxpayer B. Taxpayer B asserts that
she intended to deposit her distribution check into IRA Y at Financial Institution B.
Taxpayer B spoke to a representative of Financial Institution B on the phone and
obtained the mailing address for deposit of IRA rollovers into their existing IRA
accounts, IRA X and IRA Y, at Financial Institution B. On Date 2, Taxpayers A and B
mailed their distribution checks to Financial Institution B. The United States Postal
Service returned the checks to Taxpayers A and B on Date 3, after the expiration of the
60-day rollover period.

Upon discovery that the distribution checks had not been deposited into IRA X and
IRA Y at Financial Institution B, Taxpayer A and Taxpayer B made arrangements to do
so. On Date 4, Taxpayer A deposited his distribution check into IRA X at Financial
Institution B. Also on Date 4, Taxpayer B deposited her distribution check into IRA Y at
Financial Institution B.

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 P and Amount 2 from IRA Q.

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)(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 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
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 Taxpayers A and B is
consistent with their assertions that they timely mailed Amounts 1 and 2 to effect a
rollover, which resulted in the distribution checks for Amount 1 and Amount 2 being
returned to Taxpayers A and B after the 60-day rollover period.

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 P and
the distribution of Amount 2 from IRA Q. 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 1 and Amount 2, which were deposited into IRA X and IRA Y
respectively, will be considered rollover contributions within the meaning of section
408(d)(3) of the Code.

This ruling does not authorize the rollover of 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.

If you wish to inquire about this ruling, contact XXX XXX at (XXX) XXX-XXXX. Please
address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

[illegible signature]

Donzell Littlejohn, Manager,
Employee Plans Technical Group 2

XXX

Page 5

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose

CC: XXX
XXX
XXX
XXX

201227009