IRS waives a 60-day rollover deadline after a custodian error

Plain-English summary

An IRA custodian was resigning and instructed the taxpayer to complete an assignment form to transfer an asset to another IRA. The taxpayer sent the paperwork to an intermediary, but the intermediary failed to send the assignment form to the receiving financial institution. The receiving institution rejected the rollover after the 60-day period expired. The IRS waived the deadline because the intermediary's error prevented the rollover and gave the taxpayer 60 days from the ruling date to contribute the asset to a rollover IRA.

Ruling snapshot

• Question: Can the taxpayer complete the rollover of the IRA-held asset after the 60-day deadline because an intermediary omitted the assignment form?
• Outcome: Approved, with a new 60-day period to contribute the asset.
• Key authorities: IRC §§ 72, 401, 408, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 19 2013

[illegible handwritten notation]

Uniform Issue List: 408.03-00

XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXXXX

IRA X = XXXXXXXXXXXXXXAXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXAXXXXXX

Company M = XXXXXXXXXXXXXXX

Company N = XXXXXXXXXXXXXXX

Financial Institution O = XXXXXXXXXXXXXXX

Asset D = XXXXXXXXXXXXXXX

Date 1 = XXXXXXXXXXXAXXXX

Date 2 = XXXXXXXXAXXXAXXXX

Date 3 = XXXXXXXXXXXXXXX

Date 4 = XXXXXXXXAXXXAXXX

Date 5 = XXXXXXXXXXXXXXX

Year 6 = XXXX

XXXXXXXXXXXXXX

201407028

Page 2

Dear XXXXXXXXXXX:

This is in response to your request, dated February 1, 2013, as
supplemented by your correspondence dated October 8, 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.

Taxpayer A represents that on Date 1 she owned IRA X with respect to
which Company M was the custodian. On Date 1, Taxpayer A received a letter
from Company M informing her that Company M was resigning as the custodian
of IRA X. IRA X held Asset D, an ownership interest in a limited liability
company. The letter from Company M further stated that Asset D would be
distributed to Taxpayer A personally, and that the total value of the distribution
would be reported on Internal Revenue Service Form 1099-R for Year 6.
Taxpayer A asserts that her failure to accomplish a rollover of Asset D within the
60-day period required under section 408(d)(3) was due to an error made by
Company N.

The letter from Company M instructed Taxpayer A that, in order to effect a
change of ownership of Asset D, Taxpayer A had to complete an assignment
form enclosed with the letter, and forward the completed assignment form to
Company N along with the re-registration fee, if applicable.

On Date 2, Taxpayer A faxed the letter she received from Company M,
along with the assignment form, to Company N. Company N prepared the
documents required to rollover Asset D into an IRA held by Financial Institution
O.

On Date 3, Taxpayer A received from Company N what she believed to be
all of the documentation necessary to complete the rollover of Asset D from IRA
X to an IRA held by Financial Institution O. Taxpayer A immediately transmitted
such materials to Financial Institution O in order to complete the transaction.
However, Taxpayer A did not realize that Company N had failed to submit the
necessary assignment form provided by Company M to Financial Institution O.
Taxpayer A did not become aware of this error until the expiration of the
applicable 60-day rollover period.

On Date 4, a final decision was made by Financial Institution O to not
accept the rollover of Asset D into an IRA held by Financial Institution O based
on the fact that the assignment form had not been received by Financial
Institution O within the applicable 60-day rollover period. Thereafter, in a letter
dated Date 5, Company N admitted that it failed to provide the assignment form
to Financial Institution O, thereby preventing the rollover of Asset D to be
completed within the applicable 60-day rollover period.

XXXXXXXXXXXXXX

201407028

Page 3

Based on 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 Asset 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

(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

(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.

XXXXXXXXXXXXXX

201407028

Page 4

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 her assertion that her failure to accomplish a timely rollover of
Asset D was due to an error committed by Company N.

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
Asset D from IRA X. Taxpayer A is granted a period of 60 days from the
issuance of this ruling letter to contribute Asset D 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.

No opinion is expressed as to the tax treatment of the transaction
described herein under the provisions of any other section of the Code or
regulations.

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
6110(k)(3) of the Code provides that it may not be used or cited as precedent.

XXXXXXXXXXXXXX

201407028

Page 5

If you wish to inquire about this ruling, please contact XXXXXXXXXX (ID
XXXXXXXXXXX) at (XXX) XXX-XXXX. Please address all correspondence to

SE:T:EP:RA:T3.

Sincerely yours,

Laura B. Warshawsky, Manager,
Employee Plans Technical Group 3

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose