PLR 1340024: IRS waives the rollover deadline after a duplicate required distribution

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who received a duplicate required minimum distribution from an IRA. A financial advisor failed to account for an earlier distribution before arranging a second distribution after the taxpayer's assets had moved to another IRA. The IRS allowed the taxpayer 60 days from the ruling to contribute the excess amount to the new IRA or another rollover IRA, subject to the other section 408(d)(3) requirements. The waiver did not authorize the rollover of amounts that were required minimum distributions.

Ruling snapshot

• Question: Could the taxpayer roll over an excess required minimum distribution after an advisor's error caused a duplicate distribution?
• Outcome: Approved
• Key authorities: IRC §§ 401(a)(9), 408(d)(3)(I), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224 201340024

TAX EXEMPT AND JUL 12 2013

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

T:EP:RA:T3

Legend:

Taxpayer A = **
Company B = ***
Financial Advisor C = ***
Company D = *
IRA X = ******
********
******

IRA Y = *******
********

Amount 1 = *
Amount 2 = *

Dear **:

This is in response to your request dated September 18, 2012, as
supplemented by correspondence dated December 28, 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 represents that she received a required minimum distribution
for 20 from IRA X of Amount 1 on June 14,20 . Taxpayer A further
represents that on December 11,20 , she received a second required minimum
distribution from IRA Y of Amount 2. Taxpayer A asserts that an excess required
minimum distribution of Amount 1 was made from IRA Y due to an error by
Financial Advisor C.

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  201340024

Taxpayer A was the beneficiary of her deceased spouse’s two individual
retirement accounts (“IRAs”) and his account in a profit-sharing plan. One of the
IRAs was held with Company B as the custodian. Following the death of
Taxpayer A’s spouse on March 16, 20 ., Taxpayer A’s interests in her spouse’s
IRAs and the profit-sharing account were each rolled into IRA X on May 19,

20 . These rollovers were accomplished by trustee-to-trustee transfers.

On June 14, 20__, a required minimum distribution was made from IRA X
of Amount 1, which equaled the amount of the required minimum distribution due
for 20 with respect to the amounts transferred from her spouse’s IRA with
Company B. The distribution was not made by issuance of a check to Taxpayer
A, but was transferred (minus tax withholding) directly to a non-IRA account at
Company B.

Taxpayer A’s accounts at Company B (and those of her deceased
spouse) were handled by a registered investment advisor, Financial Advisor C.
In September 20 , Financial Advisor C moved his practice to Company D. In
November 20 , Taxpayer A transferred the assets in IRA X to a new IRA Y at
Company D. The rollover was made through a trustee to trustee transfer.

In December 20__, Taxpayer A’s counsel contacted Financial Advisor C to
ensure that the required minimum distribution from IRA X for 20. had been
made (since Taxpayer A did not recall receiving a distribution). Financial
Advisor C checked the records of Company D, and determined that no required
minimum distribution had been made from IRA Y. At that time, Financial Advisor
C no longer had access to Company B’s records, which would have shown that
Amount 1 had already been distributed from IRA X in June 20 __, before the
rollover was made to IRA Y.

Under the erroneous assumption that no distribution had yet been made
from IRA X for 20 __, Financial Advisor C had Company D make a required
minimum distribution on December 16,20 from IRA Y. The distribution
equaled Amount 2, the total minimum required distribution for 20 with respect
to the amounts rolled into IRA X from all three of her spouse’s accounts. The
distribution thus exceeded the amount required under the required minimum
distribution rules by Amount 1, the amount of the June 20 distribution from IRA
X.

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  201340024

Taxpayer A did not learn of the duplicative distributions until after she
received 1099-Rs from both Company B and Company D in 20

Based on these facts and representations, you request a ruling that the
Internal Revenue Service waive the 60 day rollover requirement contained in
section 408(d)(3) of the Code with respect to the distribution of Amount 1 from
IRA Y on December 16, 20

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

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  201340024

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 an excess required minimum distribution of
Amount 1 was made from IRA Y due to an error by Financial Advisor 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 1 from IRA Y. Taxpayer A is granted a period of 60 days from the
issuance of this ruling letter to contribute Amount 1 into IRA Y or into another
rollover IRA. Provided 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 of 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.

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  201340024

If you wish to inquire about this ruling, please contact ***(ID
*) at () -*. Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

[signature]

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

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

CC: