PLR 201327021: IRS waives the 60-day rollover requirement after an excess RMD distribution

Plain-English summary

The IRS waived the 60-day rollover requirement after a financial institution distributed more IRA assets than the taxpayer intended while processing his required minimum distribution. The taxpayer had requested a specified amount of cash and a specified number of fund shares, but the institution distributed all of the fund shares, creating an excess distribution. The excess remained in the taxpayer's account, and the IRS allowed him 60 days from the ruling date to contribute no more than that excess back into an IRA. The waiver was subject to the other rollover requirements and did not authorize rolling over amounts required to be distributed under the cited Code provisions.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement for an excess IRA distribution caused by a financial institution's processing error?
• Outcome: Approved
• Key authorities: IRC § 408(d)(1), § 408(d)(3), and § 408(d)(3)(I)

Full text (IRS public release)

201327021

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

APR 09 2013

Uniform Issue List: 408.03-00

[illegible handwritten notation]

Legend:
Taxpayer A = [redacted]
IRA B = [redacted]
Financial Institution C = [redacted]
Account D = [redacted]
Individual E = [redacted]
Fund F = [redacted]
Amount 1 = [redacted]
Amount 2 = [redacted]
Amount 3 = [redacted]
Amount 4 = [redacted]
Amount 5 = [redacted]
Amount 6 = [redacted]

Dear [redacted]:

This letter is in response to a request for a letter ruling dated November 21, 2012, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code ("Code").

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The following facts and representations have been submitted under penalty of perjury in support of the ruling requested.

Taxpayer A represents that he intended to take a distribution from IRA B of Amount 1 to satisfy his Required Minimum Distribution ("RMD") for 2012. Instead, an erroneous distribution was made of Amount 2 resulting in an excess distribution of Amount 3. Taxpayer A asserts that his failure to accomplish a rollover of Amount 3 within the 60-day period prescribed by Code section 408(d)(3) was due to an error by Financial Institution C.

On March [redacted], 20[redacted], Taxpayer A, age [redacted], met with his financial advisor's assistant, Individual E, to receive help in processing his Required Minimum Distribution ("RMD") for 2012. Taxpayer A requested that the RMD, Amount 1, be distributed from IRA B to Account D in cash equal to Amount 4 and enough shares from Fund F to equal Amount 5. These amounts together equaled the RMD for 2012. Instead of distributing enough shares from Fund F to equal Amount 5, Individual E mistakenly distributed all the shares of Fund F equal to Amount 6. Because of Individual E's error, the total distribution from IRA B was Amount 2, which was in excess of his 2012 RMD by Amount 3. The incorrect distribution of Amount 3 remains in Account D. Taxpayer A discovered the error on October [redacted], 20[redacted], when he reviewed the September statement for IRA B. Taxpayer A contacted Individual E on October [redacted], 20[redacted], to determine how to correct the error. Individual E, while acknowledging the error, indicated that the 60-day rollover period had expired. Taxpayer A represents that Individual E helped him to prepare the ruling request.

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

Section 408(d)(1) of the Code provides that, except as otherwise provided in section 408(d) of the Code, 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 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

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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) of the Code).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code does not apply to any amount described in section 408(d)(3)(A)(i) of the Code 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) of the Code from an IRA which was not includible in gross income because of the application of section 408(d)(3) of the Code.

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 (January 27, 2003) provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sections 408(d)(3)(I) and 402(c)(3)(B) 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 the documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish a timely rollover of Amount 3 was due to an error by Individual E, an employee of Financial Institution C.

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 3 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this letter ruling to contribute no more than Amount 3 back into an IRA. Provided

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all other requirements of section 408(d)(3) of the Code, except the 60-day 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 amounts that are required to be distributed by section 408(b)(3) 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.

A copy of this letter ruling has been sent to your authorized representative pursuant to a power of attorney on file in this office. If you wish to inquire about this ruling, please contact ** (I.D. *), SE:T:EP:RA:T1, at ()
*.

Sincerely yours,

[signature illegible]

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437