PLR 1331009: IRS waives the 60-day rollover deadline after a financial institution error

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer whose financial institution sent an IRA distribution to a non-IRA account despite written rollover instructions. The taxpayer did not use the distribution for another purpose and learned of the error shortly after the deadline. The IRS treated the financial institution's failure to follow the instructions as a circumstance supporting a waiver and gave the taxpayer 60 days from the ruling date to contribute the amount to an IRA. The ruling did not authorize a rollover of required minimum distributions.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement after a financial institution sent the IRA distribution to a non-IRA account?
• Outcome: Approved, the waiver was granted.
• Key authorities: IRC §§ 408(d)(3), 401(a)(9), and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

201331009

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

Uniform Issue List: 402.00-00

T:EP:RA:T3

Legend:

Taxpayer A:

IRA X:

Financial Institution S:
Financial Institution R:

Account T:

Amount M:
Date 1:

Dear

This is in response to a request dated November 21, 2012, as supplemented by
correspondence dated March 9, 2013, 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 M.
Taxpayer A asserts that her failure to accomplish a rollover of Amount M within the 60-
day period prescribed by section 408(d)(3) of the Code was due to Financial Institution
error in failing to follow Taxpayer A’s written instructions to rollover Amount M. Taxpayer
A further represents that Amount M, has not been used for any other purpose.

Financial institution S maintained IRA X on behalf of Taxpayer A. On Date 1, Taxpayer
A wrote to the Financial Institution S main office and requested a rollover of IRA X to

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Financial Institution R by wire transfer. Without consulting with Taxpayer A, IRA X was
wired into a Financial Institution R checking account, Account T, a non-IRA account.
Shortly after the expiration of the 60-day period, during a call with Financial Institution R,
Taxpayer A learned that, pursuant to the Date 1 request, Amount M from IRA X had
been wired into a non-IRA account. In that conversation Taxpayer A communicated that
her intended rollover was ignored. She was informed that Amount M could not be
placed in an IRA.

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

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.

Section 408(d)(3)(E) of the Code provides that the rollover provisions of section 408(d)

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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 her assertion that her failure to accomplish a rollover of Amount M within the 60-
day period prescribed by section 408(d)(3) of the Code was due to Financial Institution
error in failing to follow Taxpayer A’s written instructions to rollover Amount M.

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 to Taxpayer A of Amount M
from IRA X. Taxpayer A is granted a period of 60 days measured from the date of the
issuance of this letter ruling to make a rollover contribution of Amount M to an IRA (or
IRAs) described in Code section 408(a). Provided all other requirements of section
408(d)(3) of the Code, except the 60-day requirement, are met with respect to such IRA
contribution, the contribution 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.

A copy of this letter has been sent to your authorized representative in accordance with
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.

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.

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If you wish to inquire about this ruling, please contact

Please address all correspondence
to SE:T:EP:RA:T3.

Sincerely yours,

[illegible signature]

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3
Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose

cc: