PLR 1314056: IRS waives rollover deadline after erroneous IRA custodian advice

Plain-English summary

The IRS considered a taxpayer who transferred an IRA distribution into an account that was not a qualified rollover IRA because the receiving company was not an approved non-bank IRA trustee or custodian. The taxpayer relied on erroneous advice from an individual about the receiving company's ability to accept IRA rollovers. The IRS waived the 60-day rollover requirement under IRC § 408(d)(3)(I) and gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA. The waiver was subject to the other rollover requirements and did not authorize the rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover requirement after relying on erroneous custodian advice?
• Outcome: Approved, the 60-day requirement was waived for the specified distribution, subject to the ruling's conditions.
• Key authorities: IRC §§ 408(d)(3), 408(d)(3)(I), 401(a)(9), and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

Transcriber's note: This is a scanned IRS release. Obvious OCR errors in document numbers, section references, spacing, punctuation, and individual words were corrected by comparison with the scanned pages. Redacted placeholders and source wording are otherwise preserved.

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

TAX EXEMPT AND _ ~
GOVERNMENT ENTITIES
DIVISION

JAN 09 2013

U.I.L. 408.03-00 TEP. 2 Ae TS

XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXKXXXXXX
XXXXXXXXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXXXXXXX -
Individual B = XXXXXXXXXXXXXXXXXXX¥
IRA X = XXXXXXXXXXXXXXXXXXXXX
Company C = XXXXXXXXXXXXXXXXXXXXX
Company D = XXXXXXXXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXXXXXXXX

Dear XXXXXXXx:

This letter is in response to your request dated xxxxxxxxxxx, as supplemented by
correspondence dated xxxxxxxxxxx, 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

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) of the Code was due to an error

WASHINGTON, D.C. 20224 ;
201314056

201314056

committed by Individual B. Taxpayer A further asserts that Amount D has not
been used for any other purpose.

Taxpayer A maintained IRA X with Company C. Taxpayer A represents that her
husband discussed with Individual B the rollover of IRA X into an IRA with
Company D. Upon the advice of Individual B, on November ,20 ,she
transferred Amount D from IRA X by way of a direct transfer to Company D.
Amount D was deposited into an account with Company D which Individual B
named as Taxpayer A’s IRA”. However, this account was not a qualified rollover
IRA because Company D was not an approved non-bank trustee that could act
as the custodian for IRAs.

Taxpayer A relied upon Individual B to perform a valid rollover of Amount D.
Taxpayer A did not realize that Amount D was not rolled into a rollover IRA until
April ,20 , when she was informed by Company D’s accountant that the
account was not a qualified rollover IRA because Company D was not qualified
to be an IRA custodian and Amount D was not held in a qualified IRA account...

In documentation from Individual B, he admits that he gave erroneous advice to
Taxpayer A’s spouse regarding Company D's ability to to accept IRA rollovers
which led to Amount D being deposited into a non-IRA account.

Based on the foregoing facts and representations, you request that the Internal
Revenue Service waive the 60-day rollover requirement contained in section
408(d)(3) of the Code with respect to 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.

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 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 60th day after the date on which the

201314056

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 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.

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 timely rollover was
caused by her reliance on erroneous information provided by Individual B
regarding Company D’s ability to accept IRA rollovers.

201314056

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 letter ruling to contribute Amount D into a rollover IRA. Provided all other
requirements of Code section 408(d)(3) of the Code, except the 60-day
requirement, are met with respect to such contribution, 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.

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

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 have any questions concerning this ruling, please contact xxxxxxxxxx,
XXXXXXXXXXXXXXX. Please address all correspondence to SE: T: EP: RA: T3

Sincerely yours,

6, Lo

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

CC: XXXXXXXXXXXXXXXXXXXXX