PLR 1347029: IRS waived the 60-day IRA rollover deadline after an unexpected bank closure

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who received an IRA distribution after the unexpected closure of the financial institution holding the IRA. The distribution check did not identify the funds as an IRA distribution, and the taxpayer relied on a late spouse to handle the household's financial affairs. The taxpayer deposited the funds into a non-IRA account, did not use them for another purpose, and discovered the IRA source several months later. The IRS granted 60 days from the ruling date to contribute the amount to a rollover IRA, provided the other rollover requirements were satisfied. The ruling did not address the tax treatment under other Code or regulatory provisions.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement under IRC § 408(d)(3)(I)?
• 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)

201347029

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

ase AUG 29 2013

Uniform Issue List: 408.03-00

XXXXXXXXXXXXXX AT
XXXXXXXXXXXXXX T'. Ef (LA
~XXXXXXXXXXXXXX

Legend

Taxpayer A = XXXXXXXXXXXXXX

IRA B XXXXXXXXXXKXXKXX

Bank C XXXXXXXXXXKXXKXX

Account D XXXXXXXXXXXKXKX

Bank E XXXXXXXXXXXXXX

Amount 1 XXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXX:

This is in response to your request dated April 9, 2013, as submitted 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 distribution equal to Amount 1 from
IRA B, which was maintained by Bank C. Taxpayer A asserts that her failure to
accomplish a rollover within the 60-day period prescribed by 408(d)(3)(A) was
due to the fact that the distribution was unexpected and the check was not
identified as an IRA distribution compounded by the fact that Taxpayer A had
relied on her late husband to handle all their financial affairs. Taxpayer A further
represents that Amount 1 has not been used for any other purpose.

Taxpayer A maintained IRA B with Bank C. Upon the unexpected closure of
Bank C by the FDIC on October 26, 2012, a distribution check was mailed to

2 2013470249

Taxpayer A dated October 28, 2012, totaling Amount 1. Prior to his death,
Taxpayer A relied on her husband to handle their financial affairs. The
distribution check did not indicate that it was from an IRA. On November 10,
2012, Taxpayer A deposited Amount 1 into Non-IRA Account D with Bank E.
Taxpayer A did not realize the distribution was from an IRA until meeting with her
accountant in March 2013. Amount 1 remains in Account D and has not been
used for any other purpose.

Based on the above facts and representations, Taxpayer A requests that the
Service waive the 60-day rollover requirement 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), 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.

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) 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 or 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.

3 2013470249

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)(1) of the Code provides that the Secretary of the Treasury may
waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D)
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).

Rev. Proc. 2003-16, 2003-4 ILR.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 and documentation submitted by Taxpayer A is consistent with
her assertion that the failure to accomplish a timely rollover of Amount 1 was due
to the unexpected closure of Bank C and resulting unidentified distribution of
Amount 1 from IRA B compounded by her inexperience handling her financial
affairs due to her reliance on her late husband. 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 to 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, Amount 1 will be considered a valid 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.

4 901347024

If you wish to inquire about this ruling, please contact XXXXXXXXXXXXXX
(ID XXXXXXXXXxX) at (XXX) XXX-XXXX. Please address all correspondence to
SE:T:EP:RA:T1.

Sincerely yours,
0th A thin

Carlton A. Watkins, Manager
Employee Pians Technical Group 1

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