PLR 1309021: IRS waives the 60-day IRA rollover deadline after an adviser failed to establish the receiving IRA

Plain-English summary

The IRS considered a taxpayer who withdrew money from an IRA to roll it into a new IRA and invest through that account. The taxpayer sent the money to a financial adviser, who was supposed to establish the receiving IRA but did not do so. The money instead went directly to an investment, and the taxpayer learned of the problem after the 60-day rollover period had expired. The IRS waived the deadline under IRC § 408(d)(3)(I) and allowed the taxpayer 60 days from the ruling letter to contribute the amount to a rollover IRA, subject to the other rollover requirements. The ruling did not authorize the rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Can the IRS waive the 60-day IRA rollover deadline when an adviser fails to establish the receiving IRA as instructed?
• Outcome: Approved
• Key authorities: IRC §§ 72, 401(a)(9), 408(a)(6), 408(d)(1), 408(d)(3)(A), 408(d)(3)(B), 408(d)(3)(D), and 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

201309021

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

COMMISSIONER
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 05 2012

T:EP:RA:T1

Uniform Issue List: 408.03-00

Legend:

Taxpayer A = ***
IRA X = ***
Amount A = ***
Financial Institution A = ***
Financial Institution B = ***
Financial Advisor = ***
Investment = ***

Dear ***:

This is in response to your request dated June 6, 2012, as supplemented by correspondence dated September 18 and 24, October 16, 22, and 23, 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 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 Advisor in failing to establish the receiving IRA as instructed by Taxpayer A.

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Taxpayer A maintained IRA X with Financial Institution A. Financial Advisor was an employee at Financial Institution A and, separately, the president of Investment. Based on advice from Financial Advisor, Taxpayer A withdrew Amount A from IRA X on April 20, 2009, with the intention of immediately rolling it over into an IRA at Financial Institution B in order to invest in Investment. Taxpayer A then sent Amount A to Financial Advisor on the same date. Financial Advisor was supposed to establish an IRA for Taxpayer A and fund the IRA with Amount A. Financial Advisor failed to establish the IRA and Financial Institution B has no record of an IRA ever being established for Taxpayer A. Instead Amount A was received directly by Investment, a fact of which Taxpayer A did not become aware until after the 60-day rollover period.

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 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) (related to required minimum distributions under section 401(a)(9) and incidental death benefit requirements of section 401(a)).

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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 Advisor in failing to establish the receiving IRA as instructed 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 A from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount A into a rollover IRA. Provided all other requirements of 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).

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.

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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 Littlejohn, Manager,
Employee Plans Technical Group 2

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

CC: ***