PLR 1347026: IRS waived the 60-day IRA rollover deadline after a financial institution's deposit error

Plain-English summary

The IRS waived the 60-day rollover requirement after a financial institution deposited an IRA distribution into a non-IRA account despite the taxpayer's instruction to deposit it into an IRA. The taxpayer did not use the distributed amount, and the financial institution acknowledged that an employee failed to follow the rollover instructions. The IRS found that the documented mistake supported a waiver under IRC § 408(d)(3)(I). It granted 60 days from the ruling date to contribute an amount up to the distribution to a rollover IRA, subject to the other rollover requirements. The ruling did not authorize rollovers of amounts required to be distributed under § 408(a)(6) and expressed no opinion under other provisions.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because a financial institution deposited the distribution into a non-IRA account by mistake?
• Outcome: approved
• Key authorities: IRC §§ 408(b), 408(d)(1), 408(d)(3), 408(d)(3)(I), 408(a)(6), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OFTHETREASURY 2013470206

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

XEMPT AND
GOVERNMENT ENTITIES AUG 27 2013

DIVISION

Uniform Issue List: 408.03-00

TEP PAT]
Legend:
Taxpayer A =
IRA B =

Financial Institution C =
Financial Institution D =
Account E =

Amount 1 =

Dear

This is in response to your request for a ruling dated December 24, 2012, as
supplemented by correspondence dated July 30, and August 22, 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 from IRA B totaling
Amount 1. Taxpayer A asserts that his failure to accomplish a rollover of
Amount 1 within the 60-day period prescribed by section 408(d)(3) was due
to a mistake made by Financial Institution D. Taxpayer A further represents
that Amount 1 has not been used for any purpose.

Page 2

Taxpayer A maintained IRA B, an individual retirement annuity (IRA) under
section 408(b) of the Code, with Financial Institution C. In March, 2012,
Taxpayer A requested termination of IRA B with Financial Institution C. By check
dated April 7, 2011, Taxpayer A received a distribution totaling Amount 1.
Taxpayer A delivered the check totaling Amount 1 to Financial Institution D with
instructions that it be deposited into an IRA. For unexplained reasons, Amount 1
was deposited into Account E, a non-IRA account with Financial Institution D.
The error was discovered during the preparation of Taxpayer A’s 2011 tax return.
The ruling request is accompanied by a letter prepared by Financial Institution D
in which it admits one of its employees failed to follow Taxpayer A’s instructions
that Amount 1 be rolled over into an IRA account.

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), 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 60" 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 60" 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).

Page 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 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 his assertion that his failure to accomplish a timely
rollover of Amount 1 was due to a mistake made by Financial Institution D.

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 letter ruling to contribute an amount not to exceed 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 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 408(a)(6) 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.

Page 4

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 ruling has been 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

(I.D. # ), ,at( )
Sincerely yours,
OLE QQ. Wwe dsera/
Manager
Employee Plans Technical Group 1
Enclosures:
Deleted Copy of this Letter

Notice of Intention to Disclose, Notice 437

CC: