PLR 1305019: IRS waives two 60-day IRA rollover deadlines after a bank error

Plain-English summary

Two taxpayers received distributions from separate IRAs and intended to place the funds into rollover IRAs. A bank instead placed both amounts into a non-IRA certificate-of-deposit account. The taxpayers later discovered the mistake while preparing a joint federal income tax return. The funds remained in the account and represented the taxpayers' entire life savings. The IRS waived both 60-day requirements and gave each taxpayer 60 days from the ruling letter to contribute the respective amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: May the IRS waive two 60-day IRA rollover deadlines when a bank mistakenly deposits the distributions into a non-IRA account?
• Outcome: Approved, both deadlines were waived with 60-day contribution periods from the ruling letter.
• Key authorities: IRC §§ 72, 401, 408, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

201305019

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 05 2012

T:EP:RA:T1

Uniform Issue List: 408.03-00

Legend

Taxpayer A =

Taxpayer B =

IRA Account C =

IRA Account D =

Account E =

Amount 1 =

Amount 2 =

Bank N =

Bank O =

Dear :

This is in response to your request dated December 30, 2011, as supplemented
by correspondence dated June 11, June 20, June 25, 2012, and August 15,
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 A represents that he received a distribution equal to Amount 1 from
IRA Account C, which was maintained by Bank N. Taxpayer A asserts that his
failure to accomplish a rollover within the 60-day period prescribed by
408(d)(3)(A) was due to a mistake by Bank O in failing to deposit Amount 1 into a
rollover IRA account.

Taxpayer B represents that she received a distribution equal to Amount 2 from
IRA Account D, which was maintained by Bank N. Taxpayer B asserts that her
failure to accomplish a rollover within the 60-day period prescribed by
408(d)(3)(A) was also due to a mistake by Bank O in failing to deposit Amount 2
into a rollover IRA account.

On October 27, 20 [illegible] Taxpayer A received Amount 1 from his IRA Account C.
On October 27, 20 [illegible] Taxpayer B received Amount 2 in the form of a check from
her IRA Account D. Taxpayer B endorsed the check over to her husband for
deposit into an IRA account with Bank O. On November 11, 20 [illegible] Taxpayer A
used Amount 1 from IRA Account C and Amount 2 from IRA Account D to
purchase a Certificate of Deposit from Bank O, Account E.

Taxpayer A states that he believed that Account E was an IRA account and that
the manager at Bank O made a mistake in opening a non-IRA account. The
information and documentation submitted supports Taxpayer A’s and Taxpayer B’s
assertion that Bank O made a mistake in failing to deposit Amount 1 and
Amount 2 into rollover IRA accounts.

In 20 [illegible] when Taxpayer A met with his accountant to prepare his joint federal
income tax return for 20 [illegible] he discovered that Account E was not an IRA
account and that Amount 1 and Amount 2 were taxable. Amount 1 and Amount 2
have not been used for any other purpose and remain in Account E. Amounts
1 and 2 are Taxpayer A’s and Taxpayer B’s entire life savings.

Based on the above facts and representations, two rulings are requested: (1)
Taxpayer A requests that the Service waive the 60-day rollover requirement with
respect to the distribution of Amount 1 from IRA Account C, and (2) Taxpayer B
requests that the Service waive the 60-day rollover requirement with respect to
the distribution of Amount 2 from IRA Account 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.

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 and Taxpayer B
are consistent with the assertion that the failure to accomplish a timely rollover of
Amount 1 and Amount 2 was due to a mistake by Bank O. Therefore, pursuant
to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-day rollover
requirement with respect to the distributions of Amount 1 from IRA Account C
and Amount 2 from IRA Account D. Taxpayer A and Taxpayer B are each
granted a period of 60 days from the issuance of this ruling letter to contribute
Amount 1 and Amount 2, respectively, into rollover IRA accounts. Provided all
other requirements of section 408(d)(3) of the Code, except the 60-day
requirement, are met with respect to such contributions, Amount 1 and Amount 2
will be considered rollover contributions 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 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.

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