PLR 1250030: IRS waives the 60-day IRA rollover requirement

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who intended to transfer an IRA distribution to a rollover IRA, but whose bank deposited the funds into certificates of deposit and a checking account instead. The taxpayer also had a mental condition that impaired the ability to recognize that the rollover had not been completed correctly. The IRS concluded that the bank error and the taxpayer's condition supported relief. The taxpayer was given 60 days from the ruling letter to contribute the distribution to a rollover IRA, subject to the other requirements of section 408(d)(3).

Ruling snapshot

• Question: Should the IRS waive the 60-day requirement for the IRA distribution?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201250030

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 17 2012

U.I.L. 408.03-00 T:EP:RA:T3

XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXXXXXX
Amount A = XXXXXXXXXXXXXXXXXXXX
Amount B = XXXXXXXXXXXXXXXXXXXX
Amount C = XXXXXXXXXXXXXXXXXXXX
Bank B = XXXXXXXXXXXXXXXXXXXX
Bank C = XXXXXXXXXXXXXXXXXXXX

Dear XxxxXxxxx:

This letter is in response to your letter dated xxxxxxxxx, as supplemented by
correspondence dated xxxxxxxxXxXxXXXXXXXX, XXXXXXXXXXX, XXXXXXXXXXXXXXKX
XXXXXXXXXXXX, AND XXXXXXXXXXX, 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 your request.

Taxpayer A represents that he received a distribution on xxxxxxxxxxxx, from IRA
X totaling Amount A. Taxpayer A asserts that his failure to accomplish a rollover
within the 60-day period prescribed by section 408(d)(3) of the Code was due to

201250030

an error committed by Bank C combined with his mental condition which
impaired his ability to recognize that a rollover was not correctly performed by
Bank C. Taxpayer A represents that Amount A has not been used for any other
purpose.

ON XXXXXXXXXXXxx, Taxpayer A withdrew Amount A from IRA X with the intention
to rollover Amount A into a rollover IRA with Bank C. Taxpayer A represents that
he specifically instructed Bank C’s personnel that the funds be deposited into a
rollover IRA account. However, contrary to Taxpayer A’s instructions, Bank C's
representative deposited the funds into three certificates of deposit (CDs) totaling
Amount B and a checking account in the amount of Amount C.

Documentation submitted shows that Taxpayer A was suffering from a mental
condition in xxxxxxxxxxxxx which caused him to not understand that Amount A
was deposited into non- IRA accounts by Bank C.

Taxpayer A was not aware that the accounts held by Bank C were not an IRA
account until he received an underreporting notice from the Internal Revenue
Service (the Service) in xxxxxxxxx.

Based upon the foregoing facts and representations, Taxpayer A requests that
the Service waive the 60 day rollover requirement with respect to 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 received 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

201250030

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 included 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)(3) 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 and good
conscience, including casualty, disaster, or other events beyond the reasonable
control of the individual subject to such requirement. Only distributions that occur
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, or hospitalization, incarceration, restrictions imposed by a
foreign country or postal error; (3) the use of 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 A
was due to an error committed by Bank C combined with his mental condition
which impaired his ability to recognize that a rollover was not correctly performed

by Bank C.

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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. Taxpayer A is granted a period of 60 days from the issuance of this ruling
letter to contribute Amount A into 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 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 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 transactions described
herein under the provisions of any other section of either the Code or regulations,

which may be applicable thereto.

A copy of this letter is being sent to your authorized representative pursuant to a
power of attorney on file in this office.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited by others as precedent.

If you have any questions concerning this ruling, please contact IDF

, SE: T: EP: RA: T3, at

Sincerely yours,

Ade “PR

ge Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted copy of letter ruling
Notice 437

Ce: