PLR 1345040: IRS waives the 60-day IRA rollover deadline after bank error

Plain-English summary

The IRS granted a taxpayer 60 days from the ruling date to contribute a distribution to a rollover IRA. The taxpayer intended to move money from an existing IRA into another IRA, but a financial institution's incorrect instructions caused the new account to be opened as a non-IRA account. The taxpayer discovered the error after receiving a Form 1099-R, and the amount remained in the new account. Because the failure to complete the rollover on time resulted from the financial institution's error and the other requirements were satisfied, the IRS treated the later contribution as a rollover contribution under IRC § 408(d)(3). The ruling did not authorize rollovers of amounts required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: May the taxpayer complete a rollover after missing the 60-day deadline because of incorrect bank instructions?
• Outcome: Approved, a 60-day period from the ruling date was granted to contribute the amount to a rollover IRA.
• Key authorities: IRC §§ 401(a)(9), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

201345040

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 14 2013

Uniform Issue List: 408.03-00

XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXX
IRA B = XXXXXXXXXXXXXX
Bank C = XXXXXXXXXXXXXX
Account D = XXXXXXXXXXXXXX
Bank E = XXXXXXXXXXXXXX
Amount 1 = XXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXX:

This is in response to your request dated March 25, 2013, as supplemented by
correspondence dated May 13, 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 he received a distribution totaling Amount 1 from IRA
B maintained by Financial Institution C. Taxpayer A asserts that his failure to
accomplish a rollover within the 60-day period prescribed by section 408(d)(3)
was due to incorrect instructions received from a representative of Financial
Institution E. Taxpayer A further represents that Amount 1 has not been used for
any other purpose.

Taxpayer A represents that he had an IRA account held in a Certificate of
Deposit ("CD") at Bank C. Prior to the maturation of the IRA-CD, Taxpayer A had
a telephone conversation with a representative of Bank E to discuss alternative
investment options, but intended to keep the amount in an IRA. Taxpayer A
represents he told the representative that he wished to set up an IRA-CD
account with Financial Institution E. Based on verbal instructions from a
representative of Bank E, Taxpayer A opened a new account, intending it to be
an IRA. Taxpayer A states that he verbally confirmed with the representative that
the new account created would be an IRA-CD account. However, due to the
incorrect instructions received from a representative of Bank E, the account
created, Account D, was in fact, a non-IRA account. Taxpayer A then requested
a total distribution from Bank C in order to deposit it into the new account created
with Bank E. Bank C issued a check payable to Taxpayer A for Amount 1 which
he signed and provided to Bank E to fund Account D, a non-IRA account.
Taxpayer A discovered the error, in 2013, when he received a 1099-R indicating
the taxable distribution. Amount 1 remains in Account D with Bank E.

Based on the 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 B.

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
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.

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 sections 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 are
consistent with his assertion that his failure to accomplish a timely rollover of
Amount 1 was caused by incorrect instructions received by a representative of
Bank E which led to Amount 1 to be deposited into a non-IRA account.
Therefore, 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 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.

A copy of this letter is being sent to your authorized representative pursuant to a
Power of Attorney on file in this office.

If you wish to inquire about this ruling, please contact XXXXXXXXXXX (ID
XXXXXXXXX) at [illegible]. Please address all correspondence to
SE:T:EP:RA:T1.

Sincerely yours,

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

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