PLR 201340023: IRS waives a 60-day IRA rollover deadline after a financial institution error

Plain-English summary

The IRS granted an individual a waiver of the 60-day deadline for rolling an IRA distribution into a rollover IRA. The individual had asked the financial institution whether another required minimum distribution was due, and the institution incorrectly advised that a fourth payment was needed. The individual took the extra distribution, discovered the error after receiving Form 1099-R, and had other funds available for personal use. The IRS allowed 60 days from the ruling letter to contribute the amount to a rollover IRA, subject to the other rollover requirements and excluding amounts that were required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because a financial institution caused an excess distribution through incorrect advice?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3)(A), (B), (D), (E), and (I), 401(a)(9), 72, and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
201340023

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 12 2013

SE:T:EP:RA:T1

Uniform Issue List: 408.03-00

XXXXXXXXXXX
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Legend:

Taxpayer A = XXXXXXXXXXXXX

IRA B = XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX

Financial Institution C = XXXXXXXXXXXXXXXX

Amount 1 = $XXXXXXX

Dear XXXXXXXX:

This is in response to your request dated July 5, 2012, as supplemented by correspondence dated April 5, 2013, June 13, 2013, and June 20, 2013, from 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 B totaling Amount 1. Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to a mistake made by Financial Institution C which led to Amount 1 being erroneously distributed from IRA B.

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Taxpayer A maintains IRA B at Financial Institution C. Taxpayer A attained age 70 1/2 prior to 20 , and was required to receive Code section 401(a)(9) required minimum distributions from IRA B in 20 , the year of the distribution. Taxpayer A directed Financial Institution C to make the 20 required minimum distribution from IRA B in three installments. On October 17, 20 , Taxpayer A called Financial Institution C to determine whether any of the IRA B required minimum distributions remained to be made for 20 . The intent of Taxpayer A was to take a further distribution from IRA B only if it was a required minimum distribution. The representative from Financial Institution C correctly told Taxpayer A that three payments of Amount 1 had been made. However, the representative from Financial Institution C also told Taxpayer A that a fourth installment of Amount 1 needed to be taken from IRA B to fulfill her Year 1 required minimum distribution for IRA B. This was incorrect. Due to Financial Institution C’s erroneous advice, Taxpayer A received a distribution from IRA B on October 19, 20 , of Amount 1 which was in excess of the required minimum for 20 . Taxpayer A did not discover that Amount 1 was in excess of the required minimum distribution until her accountant received the Form 1099-R for 20 . Taxpayer A represents that she had other funds available for her use had the fourth payment of Amount 1 been retained in IRA B.

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 1.

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 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

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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) of the Code do not apply to any amount required to be distributed under section 408(a)(6) of the Code.

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) 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 documentation submitted by Taxpayer A are consistent with her assertion that her failure to accomplish a timely rollover was due to Financial Institution C’s error with regard to the correct required minimum distribution amount for 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 of Amount 1 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 1 into a Rollover IRA. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day

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requirement, are met with respect to such contribution, Amount 1 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.

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.

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 XXXXXXXXXXX XXXXX (ID XXXXXXXXX) at (XXX) XXXXX. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely yours,

[illegible]

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

cco: XXXXXXXXXXXX
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