PLR 1302047: IRS waives the 60-day IRA rollover deadline after a financial institution error

Plain-English summary

An IRA owner temporarily moved stock to a brokerage account to meet a lender's liquidity requirement, intending to return it to the IRA within 60 days. The financial institution did not complete the return transfer, and the taxpayer discovered the problem 17 days after the deadline. The IRS waived the 60-day requirement under section 408(d)(3)(I) and allowed 60 days from the ruling date to contribute the stock back to the IRA. The ruling did not authorize rollovers of amounts required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: May the IRS waive the 60-day IRA rollover deadline when a financial institution failed to follow the taxpayer's instructions?
• Outcome: Approved
• Key authorities: IRC §§ 401, 408, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201302047

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
OCT 17 2012
T.E.P. RA: T3

U.I.L. 408.03-00
XXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX
Legend:
Taxpayer A = XXXXXXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXXXXXX
Amount B = XXXXXXXXXXXXXXXXXXXX
Account C = XXXXXXXXXXXXXXXXXXXX
Company P = XXXXXXXXXXXXXXXXXXX
Bank D = XXXXXXXXXXXXXXXXXXX
Date 1 = XXXXXXXXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXXXXXXXX

Date 3 = XXXXXXXXXXXXXXXXXX

201302047

Dear XxXXXXXXXXX:

This letter is in response to your request dated xxxxxxxXXXXXXXX, aS
supplemented by correspondence dated xxxxxxxxxxx, and XXXXXXXXXxX, 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 on Date 1 he received a distribution of shares of
stock valued at Amount B from IRA X maintained by Company P intending to roll
them back into IRA X within 60 days. 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 the failure of Company P to follow his specific instructions
to return shares of stock into IRA X within 60 days of Date 1.

Prior to Date 1, Taxpayer A applied for a home loan with Bank D. Bank D
required him to have, at the time of closing, ten percent liquidity of the purchase
price in a non-retirement fund account.

On Date 1, upon the advice of Bank D, Taxpayer A called Company P’s
representative to temporarily transfer shares of stock valued at Amount B from
IRA X to Account C his individual brokerage account with Company P. During
this conversation he told Company P’s representative that it was imperative that
the stock be transferred back into IRA X within 60 days.

Within the 60-day rollover period, on Date 2, Taxpayer A closed the mortgage
loan with Bank D. At that time the transfer of the stock could have been returned
to IRA X. However, Taxpayer A believed that he had already instructed Company
P to return the stock to IRA X, so he did not contact Company P during the 60-
day period.

Taxpayer A relied upon Company P’s representative to transfer the stock back
into IRA X within 60 days of Date 1, but when he checked his account on line on
Date 3, seventeen (17) days after the 60 day rollover period, he discovered that
the stock had not been transferred back into IRA X as he thought he had
instructed.

201302047

Documentation submitted by Company P indicates that Company P’s
representative did not execute the transfer because he was waiting for further
instructions from Taxpayer A.

Based upon the foregoing facts and representations, you request 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 stock valued at Amount B
from IRA X.

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 60"
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
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).

201302047

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 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 timely rollover was
due to the failure of Company P to follow his specific instructions to return shares
of stock into IRA X within 60 days.

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

201302047

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.

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 xxxxxxXxXxXXXXxx,
SE: T: EP: RA: T3, at xxxxxxxxxxxx.

Sincerely yours,

[illegible]

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:

Deleted copy of letter ruling
Notice 437