IRS waives the 60-day rollover deadline for an excess IRA distribution

Plain-English summary

The IRS waived the 60-day deadline for rolling an excess individual retirement account distribution into an IRA. The taxpayer received a second required minimum distribution because the financial institution failed to record the first distribution and mistakenly advised the taxpayer to take another one. The taxpayer did not use the excess amount for another purpose and sought to return it after the error was discovered. The IRS granted 60 days from the ruling date to complete the rollover, assuming the other requirements of § 408(d)(3) were satisfied.

Ruling snapshot

• Question: Could the taxpayer roll an excess IRA distribution into an IRA after the 60-day deadline?
• Outcome: Approved, with a new 60-day rollover period measured from the ruling date.
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16; IRC § 6110(k)(3).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201333023

WASHINGTON, D.C. 20224

TAX EXEMPT AND MAY 22 2013

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

Legend
Taxpayer A:

The IRAs:

Trustee T:
Amount M:

Dear :

This is in response to your request dated August 22, 2012, 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 maintained five Individual Retirement Accounts (IRAs), The IRAs, with
Trustee T. Taxpayer A asserts that, on November 16,20[illegible] Taxpayer A received a
distribution of 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 Trustee T’s error in advising Taxpayer A to take a second required minimum
distribution for year 20[illegible]

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201333023

Taxpayer A has not used Amount M for any other purpose.

Taxpayer A has been taking required minimum distributions from the IRAs for several
years, during which time she has relied on the IRAs’ administrator at Trustee T to inform
her of the required amount and prompt her to timely take the distribution. Each year, the
IRAs’ administrator keeps a list of all his clients who have to take a required minimum
distribution, crossing each off of his list when the distribution is completed. In April 20[illegible],
Trustee T contacted Taxpayer A and told her that she was required to withdraw
approximately Amount M for 20[illegible] (“the 20[illegible] RMD"). Taxpayer A agreed to take the

20[illegible] RMD immediately, and the IRAs’ administrator transferred the funds to Taxpayer
A's personal investment account. Unfortunately, and contrary to his usual practice, the
IRAs’ administrator failed to record the distribution and cross Taxpayer A off of his list.
As a result, in November, when the IRAs’ administrator reviewed his list of clients with
outstanding required minimum distributions, Taxpayer A's name was still on his list.
Accordingly, he called Taxpayer A and erroneously told her that she was required to
withdraw her 20 RMD of Amount M.

Taxpayer A acquiesced and the IRAs’ administrator transferred the funds to Taxpayer
A's investment account. Because of the Trustee T mistake, Taxpayer A withdrew twice
the amount required. On February 27, 20[illegible], the IRAs’ administrator's assistant at
Trustee T discovered the mistake and informed Taxpayer A. Once Taxpayer A
understood that she had taken twice the required amount, she asked that the excess
amount be returned to the IRAs. However, Trustee T determined that, because the 60-
day period starting with the second distribution of the 20[illegible] RMD amount had elapsed,
Taxpayer A would need to request a ruling from the Internal Revenue Service (“the
Service”).

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 M contained in
section 408(d)(3) of the Code.

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

Page 3 201333023

(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)
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.

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 Trustee T’s error in
advising Taxpayer A to take a second required minimum distribution for year 20.

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,
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 Code section
408(d)(3), except the 60-day requirement, are met with respect to such IRA contribution,

201333023

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the contribution will be considered a rollover contribution within the meaning of Code
section 408(d)(3).

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.

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

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.

If you have any questions, please contact , by . 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: