PLR 1350049: financial institution error qualifies for a 60-day IRA rollover waiver

Plain-English summary

An older taxpayer received a distribution from an IRA and instructed a financial institution to deposit it into another IRA, but the institution instead placed the money in a non-IRA certificate of deposit. The IRS found that the missed 60-day rollover deadline resulted from the institution's error and that the distributed amount had not been used. It waived the deadline for the portion of the distribution requested for rollover, excluding amounts required to be distributed, and gave the taxpayer 60 days from the ruling date to contribute the permitted amount to a rollover IRA. The ruling did not authorize rolling over required minimum distributions.

Ruling snapshot

• Question: Should the IRS waive the 60-day rollover requirement after a financial institution mistakenly deposits an IRA distribution into a non-IRA account?
• Outcome: Approved
• Key authorities: IRC §§ 408(a), 408(d)(3)(A), 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224 201350049

TAX EXEMPT AND SEP 17 2013

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

[illegible]

Legend:

Taxpayer A =
IRA B =
Financial Institution C =

Account D =

Financial Institution E =
Amount 1 =
Amount 2 =
Amount 3 =

Amount 4 =

Dear

This is in response to your request for a ruling dated July 3, 2013, as
supplemented by correspondence dated August 8, and 14, 2013, 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’”).

201350049

Page 2

The following facts and representations have been submitted under penalty of
perjury in support of the ruling requested:

Taxpayer A represents that he attempted to transfer Amount 1 in IRA B to a
similar IRA with a different financial institution. Taxpayer A asserts that his
failure to accomplish a transfer of Amount 1 to an IRA, within the 60-day period
prescribed by section 408(d)(3), was due to a mistake made by an employee of
Financial Institution E. Taxpayer A further represents that Amount 1 has not
been used for any purpose.

Taxpayer A maintained IRA B, an individual retirement account under section
408(a) of the Code, with Financial Institution C. On June 11, 2011, Taxpayer A
requested a distribution of Amount 1 from IRA B. On June 20, 2011, Taxpayer A
visited Financial Institution E and received a check in Amount 1 payable to the
order of Financial Institution E FBO Taxpayer A. Taxpayer A communicated to
an employee of Financial Institution E his desire that Amount 1 be deposited into
an IRA. For unexplained reasons, the employee of Financial Institution E
deposited Amount 1 into Account D, a non-IRA certificate of deposit. The ruling
request is accompanied by a letter prepared by Financial Institution E in which it
admits its error which caused Amount 1 to be deposited into a non-IRA account.

Taxpayer A is currently 79 years old. His required minimum distributions for the
20[illegible] and 20[illegible] taxable years were Amounts 2 and 3, respectively.

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 4
(Amount 1 minus Amounts 2 and 3) 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 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

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(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 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 rollover of
Amount 1 into a traditional IRA, was due to a mistake made by an employee
of Financial Institution E.

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

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Amount 4 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 4 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.

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.

If you wish to inquire about this ruling, please contact

(I.D. # ), at( )
Sincerely yours,

[signature illegible]
Manager
Employee Plans Technical Group 1
Enclosures:
Deleted Copy of this Letter

Notice of Intention to Disclose, Notice 437