IRS waives the 60-day IRA rollover deadline after incorrect financial advice

Plain-English summary

An IRA owner missed the 60-day rollover deadline after placing a distribution into a savings account based on incorrect advice from a financial advisor. The owner deposited the amount into another IRA on the next business day after discovering the missed deadline. The IRS found that the documented facts were consistent with the claimed advice and waived the 60-day requirement under IRC § 408(d)(3)(I). The contribution was treated as a rollover if all other rollover requirements were met.

Ruling snapshot

• Question: Could the taxpayer’s late contribution to a second IRA qualify as a rollover after the taxpayer missed the 60-day deadline because of incorrect financial advice?
• Outcome: Approved, the 60-day requirement was waived.
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(1), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

201402018

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

OCT 17 2013
U.I.L. 408.03-00
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
Legend:
Taxpayer A = XXXXXXXXXXXXXXXX
Individual B = XXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXX
IRA Y = XXXXXXXXXXXXXXXX
Bank B = XXXXXXXXXXXXXXXX
Company C = XXXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXXX
Company F = XXXXXXXXXXXXXXX

Dear XxXXxxx:

This letter is in response to your request dated April 11, 2012, as supplemented by correspondence dated February 27, 2013, and August 26, 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”).

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

201402018

Taxpayer A represents that he received a distribution from IRA X totaling Amount D. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to incorrect advice provided by his financial advisor, Individual B, with Company F.

Taxpayer A represents that he had an annuity contract in IRA X which matured on December 18, 2011. Taxpayer A further represents that prior to the contract maturity date he consulted Individual B, his financial advisor, with Company F, who helped him with the closing of the annuity contract and reinvesting Amount D with Company F.

Taxpayer A had other retirement savings with Company F for the last 30 years and he relied heavily on his financial advisor at Company F to advise him on appropriate retirement investments, specifically, regarding the annuity contract with Company C. Taxpayer A represents that in December 2011, he conferred with Individual B of Company F about a reinvestment delay during which time Taxpayer A would evaluate his monthly living expenses to avoid investing in a retirement vehicle that included periodic payments.

Taxpayer A’s intent was to rollover Amount D into another IRA, but when he received Amount D on January 17, 2012, he deposited Amount D into his saving account with Bank B in accordance with the erroneous advice provided by Individual B.

Taxpayer A did not realize that he had missed the 60-day rollover period until April 7, 2012, when he started preparing his tax return and on April 9, 2012, the next business day, he deposited Amount D into IRA Y.

Based upon 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 D.

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-

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(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 included 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 occur 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, 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.

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The information presented and documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish a timely rollover was due to incorrect advice provided by Individual B.

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 D. Provided all other requirements of Code section 408(d)(3), except the 60-day requirement, were met with respect to the contribution of Amount D to IRA Y on April 9, 2012, the contribution of Amount D into IRA Y 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 transactions described herein under the provisions of any other section of either the Code or regulations, which may be applicable thereto.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

If you have any questions concerning this ruling, please contact xxxxxxxxxx at XXXXXXXXXXX All correspondence should be addressed to SE:T:EP:RA:T3.

Sincerely yours,

. E wlhe

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3
Enclosures:
Deleted copy of letter ruling
Notice 437