PLR 1244022: IRS waives the 60-day rollover requirement after an advisor moved IRA funds into a non-IRA annuity

Plain-English summary

The IRS waived the 60-day rollover requirement for a surviving spouse whose financial advisor moved an IRA distribution into a non-IRA annuity. The advisor did not tell the taxpayer that one of the redeemed investments was an IRA or that the 60-day rollover rule applied. The IRS found that the advisor's errors caused the missed deadline and gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA. The ruling did not authorize rollovers of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement after an advisor moved an IRA distribution into a non-IRA annuity?
• Outcome: Approved
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(1), 408(d)(3), and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

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

201244022

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 10 2012

Uniform Issue List: 408.03-00

Taxpayer A:

IRA X:

Amount M:

Amount N:

Insurance Company P:
Insurance Company I:

Financial Advisor C:

Annuity G:

Dear

This is in response to your request dated February 13, 2012, submitted on your
behalf by your authorized representative, in which you request a ruling to waive
the 60-day rollover requirement contained in section 408(d)(3) of the Internal
Revenue Code (Code).

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

Taxpayer A is a surviving spouse and owned the Individual Retirement Annuity
(IRA), IRA X, established by her deceased spouse which was maintained by
Insurance Company P. Taxpayer A represents that on September 24, 2007, she

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received a distribution from IRA X totaling Amount M. Taxpayer A asserts that
her failure to accomplish a rollover within the 60-day period prescribed by section
408(d)(3) of the Code was due to errors made by Financial Advisor C, which led
to Amount M being placed into a non-IRA annuity. Taxpayer A further represents
that Amount M has not been used for any other purpose.

Financial Advisor C prepared the application to establish IRA X on July 20, 2004,
for Taxpayer A’s deceased spouse. Financial Advisor C also established other
investments held with Insurance Company P for Taxpayer A’s deceased spouse
in the past. Taxpayer A depended on her deceased spouse to handle the
family’s financial affairs while he was alive. After his death on July 24, 2007,
Taxpayer A relied on Financial Advisor C to handle the family’s financial affairs.

On September 11, 2007, Taxpayer A met with Financial Advisor C to seek his
advice for the investments held at Insurance Company P. Financial Advisor C
recommended that the investments be redeemed and that Amount N of the
proceeds be invested in an Insurance Company I annuity, Annuity G. He did not
inform Taxpayer A that one of the investments to be redeemed was an IRA or
that the 60-day rollover requirement applied to this transaction. On September
24, 2007, Financial Advisor C completed, and Taxpayer A signed, the forms to
request the redemption of IRA X and other Insurance Company P non-IRA
investments and the proceeds were deposited into a non-IRA account at
Insurance Company P.

On October 18, 2007, Taxpayer A met with Financial Advisor C to sign the
application for Annuity G. Financial Advisor C had Taxpayer A sign a blank
application, which he completed after the meeting. On November 6, 2007,
Taxpayer A withdrew Amount N from the non-IRA account at Insurance
Company P to fund Annuity G.

Taxpayer A represents that she did not know that one of the Insurance Company
P investments was an IRA and she did not become aware of this until she
received a notice from the Internal Revenue Service (Service) in May of 2009.

Based on the facts and representations, you request a ruling that the Service
waive the 60-day rollover requirement contained in section 408(d)(3) of the Code
with respect to the distribution of Amount M.

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.

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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) 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,

201244022

whether the check was cashed); and (4) the time elapsed since the distribution
occurred.

Page 4

The information presented and documentation submitted by Taxpayer A is
consistent with her assertion that her failure to accomplish a timely rollover was
caused by errors committed by Financial Advisor C.

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
M from IRA X. Taxpayer A is granted a period of 60 days from the date of the
issuance of this letter ruling to contribute Amount M to a Rollover IRA. Provided
all other requirements of Code section 408(d)(3), except the 60-day requirement,
are met with respect to such contribution, Amount M 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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling
is being sent to your authorized representative.

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 have any questions, please contact
Please address all
correspondence to SE:T:EP:RA:T3.

Sincerely yours,

Laura B. Warshawsky, Manager

Employee Plans Technical Group 3

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose