PLR 1316027: IRS waives the 60-day IRA rollover deadline after a bank error

Plain-English summary

An individual requested a distribution from an IRA intending to roll it into another IRA. A bank representative instead prepared paperwork for a non-IRA certificate of deposit, and the individual signed it believing it was an IRA account. The IRS found that the information and documentation supported the taxpayer's account of the bank's mistake and waived the 60-day rollover requirement. The taxpayer received 60 days from the ruling date to contribute the distributed amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Whether the IRS should waive the 60-day rollover requirement after a bank deposited an IRA distribution into a non-IRA account.
• Outcome: Approved.
• Key authorities: IRC §§ 408(d)(3), 408(d)(3)(I), and 401(a)(9); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

201316027

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 24 2013

T.E.P. R.A.: T2

Uniform Issue List: 408.03-00

XKXXKXXKXKXXXKXKKXX

XXXXXXXXXXXKX

XXXXXKXXKXKXKXKXK

Legend:

Taxpayer A = XXXXXXXXXXXKX

IRA B = XXXXXXXXXKXXKX
XXXXXXKXKXXKXXKX

Financial Institution C = XXXXXXXXKXXKXXXK

Bank D = XXXXXXXXXKXXKXX

Account E = XXXXXXXXXKXXXKX
XXXXXXXKXXKXKXKXXK

Amount 1 = XXXXXXXXXXXXX

Dear XXXXXXXXXXKXXX:

This letter is in response to your request dated August 11, 2011, as supplemented by
correspondence dated June 28, and November 7, 2012, from 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 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 a mistake by Bank D in failing to
deposit Amount 1 into a rollover IRA account. Taxpayer A also represents that Amount
1 has not been used for any other purpose and remains in a non IRA account.

XXXXXXXXXXXXX
Page 2

Taxpayer A represents that he owned IRA B, which was maintained by Financial
Institution C. In the Spring of 2009, Taxpayer A represents that he was losing money in
IRA B and wanted a safer place for his retirement funds. On April [illegible], 20[illegible], Taxpayer A
liquidated IRA B and requested a distribution of Amount 1. On April [illegible], 20[illegible], Taxpayer
A represents that he went to Bank D for the purpose of doing an IRA rollover, met with a
representative of Bank D and requested the same interest rate and CD investment that
his wife had completed a month earlier. Instead of providing Taxpayer A with
paperwork to open an IRA, the representative of Bank D completed paperwork for a
non-IRA CD. Taxpayer A signed the paperwork believing he was opening an IRA but
instead opened a non-IRA Account E. The mistake was discovered in 2011 when
Taxpayer A received a deficiency notice from the Service.

Based on the facts and representations, a ruling has been requested 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.

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.

XXXXXXXXXXXXX
Page 3
201316027

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 (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 his failure to accomplish timely rollover was due to a mistake by
Bank D which resulted in Amount 1 being deposited into Account E, a non-IRA account.

Therefore, pursuant to section 408(d)(3)(B) 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 letter ruling to
contribute Amount 1 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).

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 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.

XXXXXXXXXXXXX
Page 4

201316027

If you wish to inquire about this ruling, please contact XXXXXXXXXXX (ID XXXXXXXX)
at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,

Carlton Watkins, Manager
Employee Plans Technical Group 1

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose