IRS waives the 60-day rollover deadline after an advisor's paperwork error

Plain-English summary

The IRS waived the 60-day deadline for rolling a taxpayer's IRA distribution into a rollover IRA. The taxpayer withdrew funds to use as a short-term loan for a home purchase and intended to put them back into an IRA within 60 days. A financial advisor mistakenly prepared one application instead of separate applications for an IRA account and a non-IRA account, so the distribution was deposited into the wrong type of account after the deadline. The IRS granted the waiver because the paperwork error caused the missed deadline, subject to the other requirements of § 408(d)(3). The ruling did not authorize rolling over amounts required to be distributed under § 401(a)(9).

Ruling snapshot

• Question: Could the taxpayer roll an IRA distribution into a rollover IRA after the 60-day deadline caused by an advisor's paperwork error?
• Outcome: Approved, with the other requirements of IRC § 408(d)(3) still applicable.
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), 408(d)(3)(I), and 401(a)(9); Rev. Proc. 2003-16; IRC § 6110(k)(3).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201333022

WASHINGTON, D.C. 20224

TAX EXEMPT AND MAY 23 2013

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

T.EP:RA:T1

Legend:
Taxpayer A =

IRA B =

Account C =

Financial Advisor D
Company E =
Financial Institution F =
Financial Institution G =
Form H =
Amount 1 =
Amount 2 =

Amount 3 =

Dear :

This is in response to your request for a letter ruling received in this office on October 3,
2011, submitted on your behalf by your authorized representative, as supplemented by
correspondence dated July 17, 2012, and September 24, 2012, 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”).

201333022

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 an error committed by his
financial advisor.

On August 6, 20[illegible], Taxpayer A withdrew Amount 1 from IRA B, an individual retirement
account as defined in section 408(a) of the Code, maintained by Financial Institution F.
Taxpayer A withdrew the funds for the purpose of using them as a short term loan to
purchase a new residence, intending to roll them back into an IRA account with a
different custodian, Financial Institution G, within 60 days. Taxpayer A relied on
Financial Advisor D, a registered representative of Company E. Immediately upon
receipt of the funds from the sale of his former residence, Taxpayer A, on or about
September 20, 20[illegible], mailed a check to Financial Advisor D’s office. The check totaled
Amount 3 (which was more than Amount 1) and was made payable to Financial
Institution G. The funds were to be split into one IRA rollover account and one non-IRA
account at Financial Institution G. Taxpayer A intended for Amount 1 to be rolled over
into an IRA rollover account at Financial Institution G, with Amount 2 to be deposited
into a non-IRA account. Taxpayer A states that Financial Advisor D erroneously
prepared a single application, Form H, to set up an account at Financial Institution G
when two separate application forms should have been submitted to set up two
accounts. Prior to the submission of Form H to Financial Institution G, and within the
60-day period, Taxpayer A received Form H from Financial Advisor D for signature.
Relying on Financial Advisor D to have prepared the paperwork correctly, on October 1,
20[illegible], Taxpayer A signed the application and returned Form H to Financial Advisor D.
Financial Advisor D mailed Form H and Amount 3 to Financial Institution G. Taxpayer A
represents that due to mail delay, the check was received by Financial Advisor D on
October 7,20 fand was overnighted to Financial Institution G. As a result of these
events, although Taxpayer A intended to complete a rollover of Amount 1 within 60 days
of distribution, Amount 1 and Amount 2 were deposited together into Account C
established at Financial Institution G on October 9, 20[illegible], after the expiration of the 60-

. day rollover period.

Taxpayer A believed that Amount 1 had been properly rolled over into an IRA account
within the 60-day rollover period since he had received a Form 1099-R for 2Q ‘but it

did not indicate any taxable amount. Taxpayer A did not learn that Amount 1 had not

been deposited into an IRA at Financial Institution G until he received a notice to that

effect from the Internal Revenue Service (the “Service”) in April 20[illegible]

Based on the facts and representations, you request a ruling that the Service waive the
60-day rollover requirement with respect to the distribution of Amount 1 from IRA B.

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

201333022

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 60" 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 60" 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) 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.

Revenue Procedure 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

201333022

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 1
was due to errors committed by Financial Advisor D in preparing and submitting the
paperwork and check to Financial Institution G.

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 1 from IRA B.
Provided all requirements of section 408(d)(3) of the Code, other than the 60-day
requirement, are met, the contribution of Amount 1 to a rollover IRA will be considered a
valid 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 transaction described herein
under the provisions of any other section of either the Code or regulations which may be
applicable thereto.

This letter ruling 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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being
sent to your authorized representative.

If you wish to inquire about this ruling, please contact (Identification No.
att . Please address all correspondence to SE:T:EP:RA:T1.
| Sincerely,

[illegible signature]
Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures: :
Deleted copy of letter ruling
Notice of Intention to Disclose

CC: