PLR 1305018: IRS waives the rollover deadline after a bank opens non-IRA accounts

Plain-English summary

A taxpayer moved an IRA from one bank to another using a cashier's check payable to the taxpayer's traditional IRA. The receiving bank instead opened a non-IRA savings account and a checking account, depositing portions of the distribution into each. The taxpayer withdrew some of the savings-account balance for living expenses and required minimum distributions, and a remaining amount stayed in the account. The IRS waived the 60-day rollover requirement for the remaining amount, giving the taxpayer 60 days from the ruling letter to contribute it to a rollover IRA. The ruling did not authorize rollovers 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 receiving bank deposits a rollover check into non-IRA accounts?
• Outcome: Approved for the remaining amount, with a 60-day contribution period from the ruling letter.
• Key authorities: IRC §§ 72, 401, 408, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

201305018

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 05 2012

Uniform Issue List: 408.03-00

T:EP:RA:T1

Legend

Taxpayer A =

IRA B =

Account C =

Amount 1 =

Amount 2 =

Amount 3 =

Amount 4 =

Amount 5 =

Bank L =

Bank M =

Dear :

This is in response to your request dated May 24, 2011, as supplemented by
correspondence dated August 3, 2011, June 11, 2012, and July 2, 2012, July 25,
2011, in which you request, through your authorized representative, 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.

Page 2 201305018

Taxpayer A represents that he received a total distribution of Amount 1 from IRA
B maintained by Bank L. Taxpayer A asserts that his failure to accomplish a
rollover within the 60-day period prescribed by section 408(d)(3)(A) of the Code
was due to Bank M’s error in failing to open an IRA account with a check payable
to “Taxpayer A’s Traditional IRA”.

On January 20, 2010, Taxpayer A took a total distribution from IRA B in order to
change the custodian of his IRA from Bank L to Bank M. Taxpayer A received
the distribution in the form of a cashier’s check equal to Amount 1 that was
payable to the “Taxpayer A Traditional IRA.” On January 27, 2010, Taxpayer A
went to Bank M with the check and instead of depositing Amount 1 into a
traditional IRA as the check provided, Bank M provided forms for Taxpayer A to
sign which created a non-IRA savings account, Account C, and a checking
account. Bank M then deposited Amount 2 into Account C and Amount 3 into the
checking account. Taxpayer A represents that he intended to roll over Amount 2
into an IRA account.

During 2010, 2011, and 2012, Taxpayer A withdrew amounts totaling Amount 4
from Account C for his living expenses and required minimum distributions during
these years. As of June 29, 2012, Amount 5 remains in Account C.

Based on the above facts and representations, you request that the Service
waive the 60-day rollover requirement with respect to the rollover of Amount 5
from IRA B.

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 or 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)(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 of the Treasury 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. Only distributions that
occurred after December 31, 2001, are eligible for the waiver under section
408(d)(3)(I).

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 and documentation submitted by Taxpayer A is consistent with
his assertion that his failure to accomplish a timely rollover was due to an error
committed by Bank M, which failed to deposit Amount 2 into an IRA as clearly
indicated on the check presented to Bank M 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 of Amount

2. Taxpayer A is granted a period of 60 days from the issuance of this letter
   ruling to contribute Amount 5 into a rollover IRA. Provided all other requirements
   of section 408(d)(3), except the 60-day rollover requirement, are met with respect
   to such contribution, the contribution 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
that may be applicable hereto.

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

Pursuant to a power of attorney on file with this office, a copy of this letter ruling
is being sent to your authorized representative.

If you wish to inquire about this ruling, please contact . Please address all
correspondence to SE:T:EP:RA:T1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Notice of Intention to Disclose
Deleted copy of this letter

CC: