PLR 1227010: IRS waives the 60-day IRA rollover requirement after erroneous advice

Plain-English summary

An individual received a distribution from an IRA and intended to move it into a self-directed IRA, but the amount was instead placed in a non-IRA account after the individual relied on erroneous advice from a financial advisor. The advisor acknowledged the error, and the taxpayer deposited the amount into another IRA after the 60-day period had expired. The IRS waived the 60-day requirement because the taxpayer's failure resulted from reliance on the erroneous advice, provided the other rollover requirements were satisfied. The ruling did not authorize a rollover of amounts required to be distributed under § 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement after erroneous financial-advisor instructions caused the funds to miss the deadline?
• 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

201227010

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

APR 12 2012
T: EP: RA: T2

Uniform Issue List: 408.03-00

XXX
XXX
XXX

Legend:

Taxpayer A = XXX
Amount 1 = XXX
Date 1 = XXX
Date 2 = XXX
Financial Advisor G = XXX
Financial Institution A = XXX
Financial Institution B = XXX
Financial Institution C = XXX
Fund C = XXX
IRA P = XXX
IRA Q = XXX
IRA R = XXX
Account V = XXX

Dear XXX:

This is in response to your request submitted on your behalf by your authorized representative
dated February 1, 2011, as supplemented by correspondence submitted on your behalf by your

authorized representative dated December 6, 2011, and January 12, 2012, 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”).

XXX
Page 2

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

Taxpayer A, age 70, received a distribution of Amount 1 from IRA P. Taxpayer A asserts that
her failure to accomplish a rollover of Amount 1 within the 60-day period prescribed by section
408(d)(3) of the Code was due to her reliance on erroneous advice provided by Financial

Advisor G. Taxpayer A further represents that Amount 1 has not been used for any other
purpose.

Taxpayer A decided to change her investments in IRA P. Financial Advisor G presented
Taxpayer A with a loan investment opportunity. Taxpayer A moved Amount 1 out of IRA P at
Financial Institution A in order to take advantage of this opportunity through self-directed IRA Q
at Financial Institution B. Taxpayer A entrusted the transfer of Amount 1 to Financial Advisor G.

Instead of depositing Amount 1 into IRA Q, then investing in the loan opportunity with Fund C,
Financial Advisor G and a representative of Fund C deposited the distributed assets of IRA P
directly into Fund C’s Account V, a non-IRA account, with Financial Institution C. Then Financial
Representative G and a representative of Fund C used the deposited amounts in Account V to
purchase investment notes from Fund C directly. IRA Q would not accept the investment notes
of Fund C and required that any assets within the self-directed IRA Q be purchased with funds
already within IRA Q. By the time Financial Advisor G realized his error, the 60-day period to
complete the tax-free rollover had expired. This transaction resulted in Taxpayer A failing to
deposit the distributed Amount 1 into IRA Q within 60 days of the distribution from IRA P.

Financial Advisor G has acknowledged, in writing, that he provided erroneous advice because
he misunderstood the procedures for acquiring the investment notes of Fund C and placing
them within a self-directed IRA.

Upon discovery that Amount 1 was not invested in IRA Q, Taxpayer A arranged to deposit

Amount 1 into a self-directed IRA at Financial Institution C. On Date 2, Taxpayer A deposited
Amount 1 into IRA R at Financial Institution C.

Based on the above facts and representations, you request a ruling that the Internal Revenue
Service (“Service”) waive the 60-day rollover requirement with respect to Amount 1 contained in
section 408(d)(3) of the Code in this instance.

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

XXX
Page 3

(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.

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 Taxpayer A is consistent with her
assertion that her failure to accomplish a timely rollover of Amount 1 was caused by her reliance
on erroneous advice provided by Financial Advisor G, resulting in the failure to deposit

Amount 1 into IRA Q within 60 days after being distributed from IRA P.

Therefore, pursuant to section 408(d)(3)(A) of the Code, the Service hereby waives the 60-day
rollover requirement with respect to Amount 1 from IRA P. Provided all other requirements of
section 408(d)(3) of the Code, except the 60-day requirement, were met with respect to such
the contribution of Amount 1, into IRA R, such contribution will be considered a rollover
contribution 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.

201227010

XXX
Page 4

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 ruling has been

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 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

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

CC:
XXX
XXX
XXX