PLR 201311039: IRS waives the 60-day rollover deadline after a financial institution distributed the wrong assets

Plain-English summary

The IRS waived the 60-day rollover requirement after a financial institution mistakenly transferred shares instead of the requested cash amount from an IRA. The taxpayer did not discover the error until receiving a later account statement and had not used the amount for another purpose. The IRS granted 60 days from the ruling date to contribute the amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: What relief did the IRS grant under the applicable rollover or pension funding rules?
• Outcome: Approved.
• Key authorities: IRC § 408

Full text (IRS public release)

, 201311039
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

COMMISSIONER DEC 27 2012

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

xk

Legend:

Taxpayer A = ***
IRA 4 = kK
Account Y = xe
Amount A = “**
Amount B = “ee

nek*

Financial Institution
Dear ** *:

This is in response to your request dated May 31, 2012, as supplemented by correspondence dated September 11, 2012 and October 16, 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 an error committed by Financial Institution in that Financial Institution misapplied Taxpayer A's instructions. Taxpayer A further represents that Amount A has not been used for any other purpose.

201311033

Page 2

Taxpayer A maintains IRA X with Financial Institution, and maintains a regular non-qualified account, Account Y, also with Financial Institution. On October 10, 2011, Taxpayer A called Financial Institution to request a distribution from IRA X of Amount B to be deposited into Account Y. Instead of a distribution of Amount B in cash as requested, Financial Institution mistakenly distributed that number of shares from IRA X into Account Y. Financial institution has confirmed that it mistakenly distributed that number of shares instead of the amount of dollars from IRA X into Account Y. The difference between Amount B and the value of that number of shares is equal to Amount A. Taxpayer A did not become aware of the mistake until January 9, 2012, when he received his statement from Financial Institution.

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)

nose 3 201311039

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

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 an error committed by Financial Institution.

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 (regarding 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 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.

ew

201311038

Pursuant to the power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative. If you wish to inquire about this ruling, please contact ** oF ()* Please address all correspondence

to SE:T:EP:RA:T2.

Page 4

Sincerely yours,

Dmx iitihh od
Donzell H. Eiftlejohn, Manager,

Employee Plans Technical Group 2
Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose

cc: kK