PLR 1306032: IRS waives the 60-day IRA rollover deadline after paperwork failure

Plain-English summary

The IRS considered a taxpayer who withdrew funds from an IRA intending to roll them into a new IRA. The taxpayer relied on an individual at another company to complete the rollover paperwork, but the paperwork was not completed within the 60-day period. The IRS found that the submitted documentation supported this explanation and waived the deadline. It gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: May the IRS waive the 60-day IRA rollover requirement when a representative fails to complete the necessary paperwork?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201306032

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 13 2012

U.I.L. 408.03-00

XXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXXXXXXXX
Individual B = XXXXXXXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXXXXXXXX
Company C = XXXXXXXXXXXXXXXXXXXXX
Amount A = XXXXXXXXXXXXXXXXXXXXX
Company D = XXXXXXXXXXXXXXXXXXXXX.
Company E = XXXXXXXXXXXXXXXXXXXX.

Dear XXXXXXXXX:

This letter is in response to your letter dated xxxxxxxxxxxx, as supplemented by
correspondence dated 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 penalties of
perjury in support of your request.

201306032

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 occurred because appropriate
paperwork was not fully completed by Individual B to ensure that a rollover would
be made within the 60-day rollover period. Taxpayer A further represents that
Amount A has not been used for any other purpose.

Taxpayer A maintained IRA X with Company C. Taxpayer A represents that he
called Individual B, an employee of Company D and advised Individual B of
Taxpayer A’s intent to liquidate IRA X and use the funds to purchase a new issue
of stock with Company E. Taxpayer A informed Individual B that he wanted this
transaction to be completed in the form of an IRA rollover to be established with
Company D. Taxpayer A was not fully aware of the steps required to complete a
rollover and he relied upon Individual B to perform a valid rollover in a timely
manner.

On xxxxxxxxxx, upon the advice of Individual B, Taxpayer A signed a withdrawal
surrender request form with Company C. On xxxxxxxxxxx, Taxpayer A received
a distribution from IRA X in the amount of Amount A which Taxpayer A deposited
into his personal checking account and, on the same day, used Amount A to
purchase securities with Company E.

On xxxxxxxxxxx, Taxpayer A went to Individual B’s office with the stock
certificate he purchased from Company E to arrange for the deposit of the
certificate into an IRA with Company D.

On xxxxxxxxxxx, Taxpayer A completed a private placement questionnaire which
he returned to Individual B along with the stock certificate from Company E.

On xxxxxxxxxxxx, after the expiration of the 60-day rollover period, Company D
notified Taxpayer A that Company D would not accept the stock certificate from
Company E into an IRA.

Taxpayer A relied upon Individual B to timely complete a rollover of Amount A
into a rollover IRA with Company D.

Documentation from Company D admits that the failure to complete a rollover
within the 60-day period occurred because Individual B did not complete the
necessary paperwork in a timely manner.

Based on 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 Amount A.

201306032

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
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) 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

201306032

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 timely rollover
occurred because the appropriate paper work was not fully completed by
Individual B to ensure that a rollover would be made within the 60-day rollover
period.

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 is granted a period of 60 days from the issuance of
this letter ruling 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.

201306032

If you have any questions concerning this ruling, please contact xxxxxxxxxxx,
SE:T EP RA:T3, at xxxxxxxxxxxxxxxxx.

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted copy of letter ruling
Notice 437

cc: