PLR 1316028: IRS declines to waive the 60-day IRA rollover deadline

Plain-English summary

An individual received a distribution from an IRA and transferred it to a non-IRA account during divorce proceedings. She did not realize until the following year that the amount should have been rolled into an IRA, and she represented that the funds had not been used for another purpose. The IRS declined to waive the 60-day rollover requirement under IRC § 408(d)(3)(I). The ruling explains that the taxpayer had not alleged one of the circumstances identified in Rev. Proc. 2003-16, such as a financial-institution error, death, disability, hospitalization, incarceration, foreign-country restriction, or postal error.

Ruling snapshot

• Question: Whether the IRS should waive the 60-day rollover requirement for an IRA distribution transferred to a non-IRA account.
• Outcome: Denied.
• Key authorities: IRC §§ 72, 408(d)(1), 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224 201316028

TAX EXEMPT AND JAN 24 2013

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00 T.E.P. R.A.: T2

XXXXXXXXXXAXKK

XXXXXXXXXXXXX

XXXXXXKXXXXXKXK

Legend:

Taxpayer A = XXXXXXXXXXKXKK

IRA B = XXXXXXXXXKXKXKX
XXXXXXXKXXKXXXKX
XXXXXXXKXXKXKXKK

Account C = XXXXXXXXXKKXX

Bank D = XXXXXKXXXXXXXK

Amount 1 = XXXXXXXXXXXXXK

Dear XXXXXXXXXXXXX:

This is in response to your request dated July 8, 2011, 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 equal to Amount 1 from
IRA B, which was maintained by Bank D. Taxpayer B asserts that her failure to
accomplish a rollover within the 60-day period prescribed by 408(d)(3)(A) was
due to her lack of knowledge about rollovers.

Taxpayer A represents that she owned IRA B. In May 2010, as part of divorce
proceedings, Taxpayer A was informed by her attorney that all her assets had to be
liquidated. As a result, Taxpayer A requested a total distribution of IRA B and
opened Account C with Bank D for the purpose of “saving monies for retirement.”

XXXXXXXXXXXXX 2 201316028

Taxpayer A transferred Amount 1 to Account C, a non-IRA account, on May 11,
2010.

Taxpayer A did not realize that she should have rolled Amount 1 into an IRA until
she gathered her tax documents and presented them to her accountant in 2011.
Taxpayer A further represents that Amount 1 has not been used for any other
purpose.

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.

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)
from an IRA which was not includible in gross income because of the application
of section 408(d)(3).

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).

XXXXXXXXXXXXX 3 201316028

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 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. Only distributions that
occurred after December 31, 2001, are eligible for the waiver under section
408(d)(3)(I).

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 Service has the authority to waive the 60-day rollover requirement for a
distribution from an IRA where the individual failed to complete a rollover to
another IRA within the 60-day rollover period but was prevented from doing so
because of one of the factors enumerated in Rev. Proc. 2003-16, for example,
errors committed by a financial institution, death, hospitalization, postal error,
incarceration, and/or disability. Taxpayer A has not alleged that any of the
factors enumerated in Rev. Proc. 2003-16 prevented her from timely completing
the rollover.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
declines to waive the 60-day rollover requirement with respect to the distribution
of Amount 1 from IRA B.

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 taxpayers who requested it. Section 6110(k)(3)
of the Code provides that it may not be used or cited as precedent.

XXXXXXXXXXXXX 4 201316028

If you wish to inquire about this ruling, please contact XXXXXXXXXXXXX (ID
XXXXXXXXX) at (XXX) XXX-XXXX. Please address all correspondence to
SE:T:EP:RA:T2.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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