PLR 201310052: IRS waives the 60-day rollover deadline after a financial institution error

Plain-English summary

The IRS granted a taxpayer a waiver of the 60-day deadline for rolling an IRA distribution into a rollover IRA. The taxpayer received a duplicate required minimum distribution because of an error by the financial institution and did not discover the problem until after the deadline. The taxpayer had not used the distributed amount and provided documentation that the financial institution accepted responsibility for the error. The IRS allowed 60 days from the ruling letter to make the rollover, subject to the other requirements of IRC § 408(d)(3), and stated that required minimum distributions could not be rolled over.

Ruling snapshot

• Question: May the taxpayer roll over an IRA distribution after missing the 60-day deadline because of a financial institution error?
• Outcome: Approved, the IRS waived the 60-day requirement for the specified distribution.
• Key authorities: IRC §§ 401(a)(9), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 14 2012

Uniform Issue List: 408.03-00

201310052

XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXX

IRA B = XXXXXXXXXXXXX

Financial Institution C = XXXXXXXXXXXXX

Amount 1 = XXXXXXXXXXXXX

Dear XXXXXXXXXXXXX:

This letter is in response to your request dated April 30, 2012, supplemented by additional correspondence received August 24, 2012, in which you requested 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 B totaling Amount 1. Taxpayer A asserts that his failure to accomplish a rollover of Amount 1 within the 60-day period prescribed by section 408(d)(3) was due to the error committed by Financial Institution C.

Taxpayer A represents that he maintains IRA B at Financial Institution C. On September
_, 20_, Taxpayer A completed a form with Financial Institution C which changed his Required Minimum Distribution (“RMD”) date from December __ to December ____. However, the change was not completed properly and Taxpayer A received distributions of Amount 1 on both of the above dates. These distributions were transferred directly to Taxpayer A’s brokerage account with Financial Institution C. Since Taxpayer A receives paperless statements, he did not realize the mistake until he received Form 1099 after the 60-day period.

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201310052

Taxpayer A has not used Amount 1 for any other purpose. Taxpayer A has submitted documentation from Financial Institution C that assumes responsibility for the error that resulted in the duplicate 2011 RMD distribution.

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 1 from IRA 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 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 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 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 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) of the Code.

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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), 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 he received the distribution of Amount 1 from IRA B because of an error committed by Financial Institution C, which resulted in a duplicate RMD for 20__.

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 1 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 1 to a rollover IRA account. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contribution, Amount 1 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 any 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 XXXXXXXXXXXXXX (ID XXXXXXXXX) at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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