PLR 1236037: IRS declines to waive the 60-day IRA rollover deadline after incorrect advice

Plain-English summary

The IRS declined to waive the 60-day rollover deadline for a taxpayer who withdrew two IRA distributions for anticipated medical expenses and later redeposited them after receiving incorrect advice about the deadline. The taxpayer said a retirement expert told him he had until the due date of his federal income tax return to redeposit the funds. The IRS found that he provided no evidence showing that a qualifying event beyond his reasonable control prevented a timely rollover. Because the information showed that the failure remained within the taxpayer's reasonable control, the IRS denied the requested waiver.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover deadline after relying on incorrect advice?
• Outcome: Denied
• Key authorities: IRC §§ 72, 402(c)(3)(B), 408(d)(1), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201236037

WASHINGTON, D.C. 20224

JUN 13 2012

Uniform Issue List: 408.03-00

SE: T. EP: RA: T1

Legend:

Taxpayer A =
IRA B =
Financial Institution C =
Account D =
Financial Institution E =
Amount 1 =
Amount 2 =

Dear

This letter is in response to a request for a letter ruling dated June 2, 2011, as
supplemented by correspondence dated March 13 and 29, 2012, from 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 ("Code"),
regarding the distributions of Amount 1 and Amount 2 from IRA B.

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

Taxpayer A represents that he took distributions of Amounts 1 and 2 from IRA B.
Taxpayer A asserts that his failure to accomplish a rollover of Amounts 1 and 2 within
the 60-day period prescribed by section 408(d)(3)(A) of the Code was the result of
having been given incorrect advice.

Taxpayer A maintained IRA B, an individual retirement account under section
408(a) of the Code, with Financial Institution C. During 2010, anticipating the
incurrence of emergency health care needs, Taxpayer A withdrew Amounts 1
and 2 from IRA B on June 25 and August 31, 2010, respectively. The funds

201236037

were deposited into Account D, a non IRA account, with Financial Institution E.
However, the emergency health care needs did not materialize and the funds
were no longer needed for that purpose. Taxpayer A represents that a retirement
expert advised him that he had until the due date of his Form 1040 tax return (April
15, 2011) to redeposit Amounts 1 and 2 into an IRA in order for the amounts to be
excludible from his gross income. Therefore, on April 15, 2011, Taxpayer A
redeposited Amounts 1 and 2 back into IRA B with Financial Institution C.

Based on the above facts and representations, you request that the Internal
Revenue Service (“Service”) waive the 60-day rollover requirement contained in
section 408(d)(3) of the Code with respect to the distributions of Amounts 1 and 2.

Section 408(d)(1) of the Code provides that, except as otherwise provided in
section 408(d) of the Code, 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 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) of the Code).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code does
not apply to any amount described in section 408(d)(3)(A)(i) of the Code 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) of the Code from an IRA which was not includible in gross income
because of the application of section 408(d)(3) of the Code.

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 sections 408(d)(3)(A) and 408(d)(3)(D) of the Code

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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 sections 402(c)(3)(B) and 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 the documentation submitted in this case indicates
that Taxpayer A withdrew Amounts 1 and 2 from IRA B with the stated intent of
covering anticipated medical expenses.

The Service has the authority to waive the 60-day rollover requirement for a
distribution from an IRA where the individual failed to complete a rollover to
another IRA within the 60-day rollover period because of one of the factors
enumerated in Revenue Procedure 2003-16, for example errors committed by a
financial institution, death, hospitalization, postal error, incarceration, and/or
disability. In this instance, Taxpayer A has not presented any evidence to the
Service as to how any of the factors outlined in Rev. Proc. 2003-16 affected his
ability to timely roll over the distributions of Amounts 1 and 2. Taxpayer A has
represented that a retirement expert misinformed him with respect to the period of
time allowed to complete a rollover of IRA funds. Taxpayer A, however, is unable
to provide the name of the retirement expert or his or her organization and has not
presented any other evidence of such misinformation. Taxpayer A was capable of
making himself aware of the rules and time frame for completing a rollover of
Amounts 1 and 2. The information presented indicates that the inability of
Taxpayer A to roll over Amounts 1 and 2 into an IRA within the 60-day period was,
at all times, within the reasonable control of Taxpayer A.

Under the circumstances presented in this case, the Service hereby declines to
waive the 60-day rollover requirement contained in section 408(d)(3) of the Code
with respect to the distributions of Amounts 1 and 2 from IRA B.

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.

201236037

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 (I.D. # ), , at ( ).

Sincerely yours,

Carlton A. Watkins

Manager
Employee Plans Technical Group 1

CC: