PLR 1309024: IRS waives the 60-day IRA rollover deadline after a bank error

Plain-English summary

The IRS considered a taxpayer who withdrew IRA assets intending to roll part of them into another IRA certificate of deposit and use the remainder for living and medical expenses. A bank employee mistakenly deposited the intended rollover amount into a non-IRA account. The IRS waived the 60-day rollover requirement under IRC § 408(d)(3)(I) and gave the taxpayer 60 days from the ruling letter to contribute all or part of that amount to a rollover IRA, provided the other requirements were met. The ruling did not authorize a rollover of required minimum distributions under IRC § 401(a)(9).

Ruling snapshot

• Question: Can the taxpayer receive a waiver of the 60-day IRA rollover deadline after a bank mistakenly deposits the rollover amount into a non-IRA account?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3)(A), 408(d)(3)(I), and 401(a)(9); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201309024

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION DEC -7 2012
TEP LATI

Uniform Issue List: 408.03-00

Legend

Taxpayer A =
IRA Account B =
Account C =
Amount 1 =
Amount 2 =
Amount 3 =
Bank L =
Dear

This letter is in response to a request for a letter ruling dated October ,20 ,
as supplemented by correspondence dated November 20 |, in which you
requested, 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 were submitted under penalty of perjury
in support of your request for a waiver.

Taxpayer A represents that he withdrew all of the assets equal to Amount 1 from
IRA Account B, an individual retirement account within the meaning of section
408(a) of the Code, which was maintained with Bank L. Taxpayer A asserts that
his failure to accomplish a rollover within the 60-day period prescribed by section
408(d)(3)(A) was due to the failure of Bank L to deposit Amount 2 of the
distribution into a rollover IRA account.

Taxpayer A retired in 2007 and on January __, 20'_., he rolled his retirement
savings into IRA Account B with Bank L. On July’ , 20° , Taxpayer A

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responded to a notification by Bank L that the Certificate of Deposit (“CD”) held in
Taxpayer A’s IRA Account B was scheduled to mature. Taxpayer A represents
that he went to Bank L on that date with the intention of renewing the CD and
moving some funds to his personal checking account to be used for living and
medical expenses. Taxpayer A withdrew Amount 1 from IRA Account B with the
intention of rolling over Amount 2 into another IRA CD with Bank L, and using the
balance (Amount 1 less Amount 2) to purchase a non-IRA CD to pay for living
and medical expenses. However, the employee of Bank L who was handling the
transaction mistakenly deposited Amount 2 into non-IRA Account C. Taxpayer A
first became aware that Amount 2 had been used to purchase a non-IRA CD
when he received the Form 1099-Rin20 .AsofOctober ,20 , the
balance in non-IRA Account C is equal to Amount 3, which represents Amount 2
less additional monthly living expenses during 20 and 20°

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 2
from IRA Account 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)

201309024

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 (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).

Revenue Procedure 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)(l), 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 show that Taxpayer A intended to
roll over Amount 2 into an IRA CD and that the employee of Bank L handling the
transaction mistakenly deposited Amount 2 into non-IRA Account 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

2. Taxpayer A is granted a period of 60 days from the issuance of this letter
   ruling to contribute Amount 2 or a portion thereof 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).

Please note that, pursuant to section 408(d)(3)(E) of the Code, this ruling does
not authorize the rollover of section 401(a)(9) minimum required distributions.

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.

Page 4
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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 have any questions regarding this ruling, you may contact.

Sincerely yours,
Carlton A. Watkins

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

cc: