PLR 1347025: IRS waived rollover deadlines after an IRA stock-purchase error and incorrect IRS advice

Plain-English summary

The IRS waived the 60-day rollover requirement for two distributions from a taxpayer's IRA. The first arose after an IRA custodian treated a stock purchase as a distribution and the taxpayer's attempt to return the funds placed them into a non-IRA account. The second resulted after the taxpayer followed advice from an IRS employee to move the funds out of the IRA while awaiting a waiver. The IRS found that the taxpayer intended to keep the funds in the IRA and that the documented facts supported relief for both distributions. The first contribution was treated as a valid rollover, and the taxpayer received 60 days from the ruling date to contribute the second amount to the IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement for two IRA distributions caused by transaction errors and incorrect advice?
• Outcome: approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), 408(d)(3)(I), 401(a)(9), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 20134 7095
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES AUG 26 2013
DIVISION

Uniform Issue List: 408.03-00
T!EP.2A' TI
LEGEND:
Taxpayer A
IRA B
Custodian C
Account D
Company E

Amount 1

Amount 2

Dear

This letter responds to your request for a letter ruling dated October 29, 2012, as
supplemented by correspondence dated May 16, 2013, and June 12, 2013, 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’”).

You submitted the following facts and representations in support of your request under
penalties of perjury:

Taxpayer A represents that he received distributions from IRA B of Amount 1 and
Amount 2. Taxpayer A asserts that his failure to accomplish rollovers of these
distributions within the 60-day period prescribed by section 408(d)(3) was due to an
inadvertent deposit of Amount 1 into a non-IRA account and the inaccurate advice that
led him unnecessarily to withdraw Amount 1 again from IRA B after having repaid it

once.

901347025

Taxpayer A owns stock in Company E. Taxpayer A’s status as a stockholder in
Company E qualified him to participate ina Company E stock purchase program, where
he could make purchases of shares of Company E’s stock on a monthly basis.
Taxpayer A represents that when he filled out the forms to participate in the stock
purchase program, he believed that he would be able to use IRA B assets toward
purchases without any distributions from IRA B. He represents he had previously made
similar investments in stock with IRA B assets, and Custodian C had not treated the
purchases as distributions from IRA B. Taxpayer A represents that he never intended
for Company E to make a taxable distribution from IRA B to purchase Company E
stock, and that he wanted to keep his funds in IRA B.

On June 27, 2011, Company E used Amount 1 to make a stock purchase. Rather than
treat the transaction as an ordinary purchase of stock within IRA B, Custodian C listed
the transaction as a distribution on Taxpayer A’s account statement. Taxpayer A
immediately contacted Company E and discontinued participation in the stock purchase
program. On July 11, 2011, Company E sent Taxpayer A a check for Amount 2
(Amount 1 plus earnings on the Company E stock). In the process of returning funds to
IRA B, Amount 2 was inadvertently transferred to Account D, a non-IRA investment
account with Custodian C. The mistake was not discovered until after the expiration of
the 60-day rollover period. Taxpayer A represents, however, that Custodian C
permitted him to transfer Amount 1 back into IRA B on June 18, 2012.

Soon after, Taxpayer A contacted an Internal Revenue Service (“Service”) employee to
obtain information about the transaction and whether he should apply for a waiver of the
60-day period. Although he had not submitted a formal request, Taxpayer A represents
that the Service employee advised him that he would receive a waiver of the 60-day
period. Taxpayer A further represented that the Service employee advised him to take
Amount 1 out of IRA B, return it to Account D, and then re-execute the transfer of
Amount 1 into IRA B from Account D upon receipt of the waiver.

Taxpayer A represented that, acting on the advice he received from the Service
employee, he transferred Amount 1 out of IRA B into Account D on August 2, 2012. He
provided a copy of a facsimile sent to the Service employee on August 2, 2012,
memorializing the conversation in which the Service employee purportedly advised
Taxpayer A to execute the transfer of Amount 1 to Account D. He also provided a copy
of an August 29, 2012 facsimile requesting guidance from the Service employee and
noting that he was waiting for the Service employee’s permission to re-deposit Amount
1 into IRA B. It is unclear how the Service employee responded to these requests.
However, Taxpayer A represented that because he followed the Service employee's
advice and transferred Amount 1 and did not return it within a 60-day period, the
transfer was treated as a distribution from IRA B.

Based on the facts and representations, you request that the Service waive the 60-day
rollover requirement contained in section 408(d)(3) of the Code with respect to both
distributions of Amount 1 from IRA B.

2013847025

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 received 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 and 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).

Rev. Proc. 2003-16, 2003-4 I.R. B. 359, 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, or
hospitalization, incarceration, restrictions imposed by a foreign country or postal error;
(3) the use of amount distributed (for example, in the case of payment by check,

2013470925

whether the check was cashed); and (4) the time elapsed since the distribution
occurred.

The information and document submitted by Taxpayer A is consistent with his assertion
that he intended to roll over Amount 1 into IRA B, but that Amount 1 was instead placed
into a non-IRA account and that the failure to accomplish a timely rollover of the second
distribution of Amount 1 resulted from incorrect advice he received from a Service

employee.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the
60-day rollover requirement for both distributions of Amount 1 from IRA B. With respect
to the first distribution of Amount 1, the contribution of Amount 1 to IRA B on June 18,
2012, will be considered a valid rollover contribution. With respect to the second
distribution of Amount 1, Taxpayer A is granted a period of 60 days from the issuance of
this ruling letter to contribute Amount 1 into IRA B. 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.

No opinion is expressed as to the tax treatment of the transactions described herein
under the provisions of any other section of either the Code or regulations, which may
be applicable thereto.

This ruling does not authorize the rollover of amounts that are required to be distributed
by section 401(a)(9) of the Code.

This letter is directed only to the taxpayer who requested it. Section 61 10(k)(3) of the
Code provides that it may not be used or cited as precedent.

If you wish to inquire about this ruling, please contact (ID Number
yat() . Please address all correspondence to
SE:T:EP:RA:T:1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted copy of letter ruling
Notice of Intention to Disclose, Notice 437