PLR 1247022: IRS waives the 60-day IRA rollover deadline after a financial institution error

Plain-English summary

The IRS waived the 60-day rollover requirement for an individual who received distributions from an IRA and intended to return unused funds to an IRA. The funds were temporarily held in a non-qualified account while a financial advisor arranged oil and gas investments, but the advisor did not redeposit the remaining funds before the deadline. The IRS found that the missed deadline resulted from the financial institution representative's error and allowed the taxpayer 60 days from the ruling date to contribute the remaining amount to an IRA. The ruling applied the waiver authority in IRC § 408(d)(3)(I), subject to the other rollover requirements.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement for funds not timely redeposited because of a financial advisor's error?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), 72, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

201247022
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 30 2012

Uniform Issue List: 408.03-00

[illegible handwritten notation]

Legend:

Taxpayer = ****
Spouse = ****
IRA X = ********
*********
**
Financial Institution A = ****
Financial Advisor F = ****
Amount A = *
Amount B = *
Amount C = *
Amount D = *
Date 1 = ***
Date 2 = ******

201247022

Page 2

Date 3 = ****

This is in response to your request dated February 6, 2012, and supplemented
with information provided on May 31, 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, age 61, represents that he received distributions from IRA X of
Amount A and Amount B. Taxpayer asserts that his failure to accomplish a rollover of
Amount D into IRA X within the 60-day period prescribed by section 408(d)(3) was due
to an error made by a representative from Financial Institution A. Taxpayer and Spouse
file a joint income tax return.

On Date 1, Taxpayer withdrew Amount A from IRA X, and on Date 3, Taxpayer
withdrew Amount B from IRA X. Both amounts were temporarily deposited in a non-
qualified account so his financial advisor, Financial Advisor F from Financial Institution
A, could purchase oil and gas tax-advantaged investments on behalf of Taxpayer.
However, Financial Advisor F had only purchased Amount C of the investments on Date

2. Taxpayer has provided documentation consistent with his assertion that it was his
   intent to roll over any funds not invested in the oil and gas investments recommended
   by Financial Advisor F back into an IRA and that Financial Advisor F took responsibility
   for rolling the funds over. After approximately three months, it became apparent to
   Financial Advisor F that there were no more opportunities to purchase additional
   interests in the investments. By the time Financial Advisor F had discovered that he
   could not purchase additional investments on behalf of Taxpayer, the 60-day period had
   expired in which he could roll over the remaining funds, Amount D into an IRA.
   Financial Advisor F has provided documentation taking responsibility for the error.

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 D.

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.

201247022

Page 3

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)(I) of the Code provides that the Secretary of the Treasury (or
his delegate) 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 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 is
consistent with his assertion that his failure to accomplish a timely rollover was caused
by an error committed by Financial Advisor F by not timely re-depositing the unused
funds into an IRA.

201247022

Page 4

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 D from
IRA X. Taxpayer is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount D into an 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 D will be considered a rollover contribution within the meaning of section
408(d)(3) 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.

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 has been sent to your authorized representative in
accordance with a power of attorney on file in this office.

If you wish to inquire about this ruling, please contact * at () *-
*. 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: ****
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