PLR 1308034: IRS waived the 60-day IRA rollover deadline after misleading account instructions

Plain-English summary

The IRS considered an IRA distribution that the taxpayer intended to divide between two new IRAs. Representatives directed the taxpayer to online forms but did not explain the difference between IRA and non-IRA accounts. The funds were deposited into non-IRA accounts and were not otherwise used. The IRS waived the 60-day requirement and allowed 60 days to contribute the amount to a rollover IRA.

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement after misleading instructions led to non-IRA accounts?
• Outcome: approved
• Key authorities: IRC § 408(d)(3)(I); IRC § 401(a)(9)

Full text (IRS public release)

TAX EXEMPT

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224 201308034

AND

GOVERNMENT ENTITIES

DIVISION

NOV 8 0 2012
U.I.L. 408.03-00 T:EP:RA:T3
‘ é 4

XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXXXXXX

IRA X = XXXXXXXXXXXXXXXXXXX

Company B = XXXXXXXXXXXXXXXXXXX

Company C = XXXXXXXXXXXXXXXXXXXX

Company F = XXXXXXXXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXXXXXXXX
Amount E = XXXXXXXXXXXXXXXXXXXX

Date 1 = XXXXXXXXXXXXXXXXXXXXX

Date 2 = XXXXXXXXXXXXXXXXXXXXXX

Date 3 = XXXXXXXXXXXXXXXXXXXXXX

Dear xxxxxx:

This letter is in response to your request dated xxxxxxxxx, 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 penalty of
perjury in support of the ruling requested.

201308034

Taxpayer A represents that she received a distribution from IRA X totaling
Amount D. Taxpayer A asserts that her failure to accomplish a rollover within the
60-day period prescribed by section 408(d)(3) was due to the misleading
instructions given to her by representatives of Company B and Company C,
which led to Amount D being placed into non-IRA accounts. Taxpayer A further
represents that Amount D has not been used for any other purpose.

Taxpayer A maintained IRA X with Company F. In May 20, Taxpayer A
decided to move IRA X to two new IRAs at Company B and Company C to
reduce the IRA management fees. Taxpayer A requested a distribution from IRA
X and, Company F issued a check totaling Amount D, representing the balance
of IRA X.

Taxpayer A called both Company B and Company C and spoke with service

representatives and discussed her desire to rollover the distribution from IRA X to
another IRA with their Company. The retirement plan service representatives of

Company B and Company C directed Taxpayer A to fill out their online forms for
completing the rollover. In doing so, they instructed Taxpayer A to visit their |
respective websites to open her new IRA account. However, the service
representatives at Company B and Company C did not tell her that there would |
be a difference between the forms for setting up an IRA account versus a non- |
IRA account. Taxpayer A went to their Company websites and completed the
forms that she thought would open an IRA account at Company B and Company |
C. Taxpayer A, followed the instructions that were given to her, by going to the

website addresses to complete the rollover. Taxpayer A did not have experience

in online forms and was unaware that the forms she completed were for non-IRA

accounts.

Taxpayer A sent the completed forms and two checks each in the amount of
Amount E to Company B and Company C. The first check was deposited by
Company C on Date 2 into a non-IRA account and the second check was
deposited by Company B on Date 3 into a non-IRA account. Taxpayer A did not
realize that the accounts she had opened were not IRA accounts until she met
with her accountant in 20 toprepare her 20 tax return.

Based upon the foregoing facts and representations, Taxpayer A requests that
the Internal Revenue Service waive the 60 day rollover requirement with respect
to the distribution of Amount 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 of the Code.

201308034

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) theentire 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 60" 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
after December 31, 2001, are eligible for the waiver under section 408(d)(3)(I) of
the Code.

‘ 201308034

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 her assertion that her failure to accomplish a rollover of Amount D
was caused by the misleading directions given her by service representatives of
Company B and Company C.

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
D from IRA X. Taxpayer A is granted a period of 60 days from the issuance of
this ruling letter to contribute Amount D, into a rollover IRA. Provided all other
requirements of Code section 408(d)(3), except the 60-day requirement are met,
the contribution of Amount D 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.

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.

A copy of this letter is being sent to your authorized representative pursuant to a
power of attorney on file in this office.

5 201308034

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

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3
Enclosures:
Deleted copy of letter ruling
Notice 437

Co: XXXXXXXXXXXXXXXXX