PLR 1244024: IRS waives the 60-day IRA rollover requirement after a bank account error

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer whose bank deposited an IRA distribution into an unrelated trust account instead of the requested IRA rollover account. The taxpayer discovered the error after the deadline and placed the money in a money market account while working with the bank. Because the bank acknowledged its mistake, the IRS gave the taxpayer 60 days from the ruling date to contribute the amount to an IRA. The relief remained subject to the other requirements of IRC § 408(d)(3).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement after a bank deposited the distribution into the wrong account?
• Outcome: Approved
• Key authorities: IRC §§ 72, 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
201244024

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 10 2012

UIL: 408.03-00

Legend

Taxpayer A: [illegible handwritten notation]

IRA X:

Amount M:
Bank L:
Credit Union L:

Fund V:

Dear

This is in response to your request dated April 6, 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”).

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

Taxpayer A maintained an Individual Retirement (IRA), IRA X with Credit Union
L. Taxpayer A asserts that, on March 17, 2011, he received a distribution of
Amount M from IRA X. Taxpayer A asserts that his failure to accomplish a
rollover of Amount M within the 60-day period prescribed by section 408(d)(3) of
the Code was due to the failure of Bank L to open an IRA rollover account as
requested by Taxpayer A.

On March 17, 2011, the certificate of deposit associated with IRA X matured.
Taxpayer A transferred the maturity amount, Amount M, to Bank L on the same
day. Taxpayer A told a representative of Bank L that Amount M was from an IRA
and he wanted the Amount M to be deposited into an IRA CD. Taxpayer A

201244024

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believed that Bank L had opened a rollover IRA to receive the transfer. However,
Bank L took information from an unrelated trust account that Taxpayer A had
opened three days before and mistakenly deposited Amount M into the trust
account.

Taxpayer A did not realize the mistake until March 19, 2012, when he attempted
to rollover Amount M into another IRA with Fund V and was informed by Bank L
that Amount M was not in an IRA.

On March 19, 2012, Taxpayer A deposited Amount M into a money market
account pending his discussions with Bank L seeking help for this problem.

Taxpayer A submitted a letter from Bank L dated March 22, 2012, in which, Bank
L admitted that it misunderstood Taxpayer A’s intentions and should have
opened an 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 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.

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)).

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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.

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 Internal Revenue Service (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 rollover of Amount M
within the 60 day period prescribed by section 408(d)(3) of the Code was due to
the failure of Bank L to open an IRA rollover account as requested by Taxpayer
A.

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 to
Taxpayer A of Amount M, Taxpayer A is granted a period of 60 days measured
from the date of the issuance of this letter ruling to make a rollover contribution of
Amount M to an IRA (or IRAs) described in Code section 408(a). Provided all
other requirements of Code section 408(d)(3), except the 60-day requirement,
are met with respect to such IRA contribution, the contribution will be considered
a rollover contribution within the meaning of Code section 408(d)(3).

201244024

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.

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.

If you have any questions, please contact .

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

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