PLR 1231020: IRS waives the 60-day IRA rollover deadline after a financial institution error

Plain-English summary

The IRS considered a taxpayer who received a distribution from an IRA intending to roll the funds into another IRA within 60 days. A financial institution mistakenly deposited the amount into a non-IRA account, and the taxpayer did not discover the error until after the deadline. The IRS waived the 60-day requirement under IRC § 408(d)(3)(I) and gave the taxpayer 60 days from the ruling letter to contribute the amount to a rollover IRA, subject to the other rollover rules. The ruling did not authorize a rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement after a financial institution error caused the taxpayer to miss the deadline?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3)(A), 408(d)(3)(B), 408(d)(3)(D), 408(d)(3)(E), 408(d)(3)(I), 401(a)(9), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201231020

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

MAY 11 2012

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

[illegible]

Legend:

Taxpayer A =

IRA X =

Amount A =

Date 1 =

Date 2 =

Date 3 =

Date 4 =

Financial
Institution B =

Individual I =

Dear

This is in response to your request dated August 30, 2011, as supplemented by
correspondence dated December 14, 2011, and January 11, 2012, 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.

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Taxpayer A, age 74, filing a joint income tax return with his spouse, represents
that he received a distribution from IRA X totaling Amount A. Taxpayer A states that
his failure to accomplish a rollover 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 into a non-IRA account. Taxpayer A further asserts that
Amount A has not been used for any other purpose.

Taxpayer A represents that on Date 1, he requested a distribution of Amount A
from IRA X for a better investment opportunity, with the intent to roll over the funds into
another IRA before the 60-day rollover period expired. On Date 2, Taxpayer A
instructed Financial Institution B to deposit Amount A into a rollover IRA. Taxpayer A
discovered that Amount A had been deposited into a non-IRA account only when he
received a Notice from the Internal Revenue Service on Date 3.

On Date 4, Individual I, the Chief Executive Officer and President of Financial
Institution B, provided documentation indicating that Financial Institution B incorrectly
deposited Amount A into 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 A.

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

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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 is
consistent with his assertion that his failure to accomplish a timely rollover of Amount A
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 distribution of Amount A
from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling
letter to contribute Amount A 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 A 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 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.

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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, please contact [illegible] at
[illegible]. 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