PLR 1304012: IRS waives the 60-day IRA rollover deadline after financial-institution error

Plain-English summary

A taxpayer withdrew funds from an IRA to provide short-term capital to a company owned by the taxpayer's wife. A financial advisor incorrectly told the taxpayer that the rollover deadline was June 5, 2009, and the taxpayer redeposited the funds on that date. The IRS determined that the missed deadline resulted from the financial institution's error and waived the 60-day requirement under IRC § 408(d)(3)(I). The contribution was treated as a rollover if the other requirements were met. The ruling did not authorize rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: May the IRS waive the 60-day IRA rollover deadline when a financial advisor provides an incorrect deadline?
• Outcome: Approved, the 60-day requirement was waived.
• Key authorities: IRC §§ 401, 408, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

201304012

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

COMMISSIONER OCT 31 2012

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

kk*

xkex ~~
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Legend:

Taxpayer A = **e

CompanyA = “*

IRA X = ***

Financial Institution A = ***
Financial Advisor A = ***
Financial Institution B = ***

Amount A = “*

Dear

This is in response to your request dated August 11, 2010, as supplemented by
correspondence dated March 4, 2011, March 21, 2011, April 13, 2011, June 6, 2011,
and July 13, 2011, 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 represents that he received a distribution 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 a mistake made by Financial
Institution A, in that Financial Advisor A, an employee of Financial Institution A, provided
an incorrect rollover deadline date to Taxpayer A.

Taxpayer A is the owner of IRA X maintained by Financial Institution A.
Taxpayer A works for Company A, an S-corporation 100% owned by Taxpayer A's wife.

.

201304012

Page 2

In early 2009, Company A needed capital as a result of the economic downturn.
On March 2, 2009, Taxpayer A contacted Financial Advisor A, his financial advisor at
Financial Institution A, to see if Taxpayer A could use funds in IRA X on a short-term
basis (four to six weeks). Financial Advisor A assured him that he could use his IRA
money on a short-term basis and that Financial Institution A would wire the funds to
Company A's account at Financial Institution B. Accordingly, on March 5, 2009,
Financial Institution A wired Amount A from IRA X to Company A's account. None of the
IRA distribution paperwork included any statements as to the 60-day rollover deadline.
Taxpayer A called Financial Advisor A to find out exactly when Amount A would need to
be redeposited to IRA to avoid a taxable distribution. Financial Advisor A replied that
June 5, 2009 was the deadline; however, June 5, 2009 was past the 60-day deadline.
Financial Advisor A has confirmed that he advised the incorrect date of June 5, 2009.
Following Financial Advisor A's instructions, Taxpayer A wired back Amount A from
Company A's account to IRA X on June 5, 2009.

Taxpayer A completely relied on Financial Advisor A's instructions as to the time
to redeposit Amount A. Had he been aware of the 60-day deadline, Taxpayer A had the
funds available in Company A's account during the 60-day period to redeposit Amount A
in IRA X.

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 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.

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) 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

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‘

201304012

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)(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)

(related to required minimum distributions under section 401(a)(9) and incidental death

benefit requirements of section 401(a)).

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) 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) 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, 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 caused
by a mistake made by Financial Institution A, in that Financial Advisor A, an employee of
Financial Institution A, provided an incorrect rollover deadline date to 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 of Amount A from
IRA X. Taxpayer A has represented that Amount A has remained in IRA X since being
redeposited. Provided all other requirements of section 408(d)(3), except the 60-day
requirement, are met with respect to such contribution, the contribution of Amount A to
IRA X on June 5, 2009 will be considered a rollover contribution within the meaning of
section 408(d)(3).

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.

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.

201304012

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If you wish to inquire about this ruling, please contact * at ***
**** Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,
Donzell H. Littlejohn, Manager,
Employee Plans Technical Group 2
Enclosures:

Deleted copy of ruling letter
Notice 437 - Notice of Intention to Disclose