IRS waives the 60-day IRA rollover requirement after a financial institution error

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer to roll a distribution from an IRA into a rollover IRA. The taxpayer said the financial institution incorrectly told her that the funds were not held in an IRA, and she invested the distribution in two certificates of deposit without using it for another purpose. The waiver was granted under IRC § 408(d)(3)(I), which allows relief when enforcing the deadline would be against equity or good conscience. The taxpayer received 60 days from the ruling letter to make the contribution, subject to the other rollover requirements.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day deadline for rolling the IRA distribution into a rollover IRA?
• Outcome: Approved, the 60-day rollover requirement was waived
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), 408(d)(3)(I), 401(a)(9), 72, and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201409018

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
DEC 04 2013
U.I.L. 408.03-00
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
Legend:
Taxpayer A = XXXXXXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXXXXXXX
Credit Union B = XXXXXXXXXXXXXXXXXXXXX
Company C = XXXXXXXXXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXXXXXXXX
Date 1 = XXXXXXXXXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXXXXXXXXX
Date 3 = XXXXXXXXXXXXXXXXXXXX
Date 4 = XXXXXXXXXXXXXXXXXXXX

Dear XxXXXXXXXxX:

This letter is in response to your request dated January 24, 2013, as supplemented by correspondence dated April 25, 2013, September 6, 2013, and November 18, 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).

2 201409018

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 from IRA X totaling Amount D. Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to an error committed by Company C.

Taxpayer A maintained IRA X with Company C. Taxpayer A represents that on Date 1, she received a distribution from IRA X in the amount of Amount D and closed her account with Company C because the account was not performing well at Company C. On Date 2, Amount D was invested in two certificates of deposit with Credit Union B. Amount D has not been used for any other purpose.

Taxpayer A further represents that prior to closing IRA X on Date 3, she and her financial advisor called Company C to determine whether Amount D was held in an IRA account, and they were told by Company C that Amount D was not held in an IRA account. Taxpayer A relied on the information provided by Company C.

Taxpayer A represents that if she had known that Amount D was held in an IRA account, she would not have withdrawn Amount D. Taxpayer A did not discover that Amount D was held in an IRA account until she received a Form 1099-R from Company C on Date 4.

Based on the foregoing facts and representations, you request that the Internal Revenue Service waive the 60 day rollover requirement contained in section 408(d)(3) of the Code with respect to 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-

(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

3 201409018

(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 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, 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, or 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 was due to an error committed by Company C.

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 from IRA X. Taxpayer A is granted a period of 60 days from the issuance of

this ruling letter to contribute Amount D into a rollover IRA. Provided all other requirements of Code section 408(d)(3) of the Code, except the 60-day requirement are met, Amount D 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.

A copy of this letter is being sent to your authorized representative pursuant to a power of attorney on file in this office.

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 have any questions concerning this ruling, please contact XXXXXXXXXXXXXXX, at XXXXXXXXXXXXX. All correspondence should be addressed to

SE:T:EP:RA:T3.
Sincerely yours,

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

Deleted copy of letter ruling
Notice of Intention to Disclose

CC: XXXXXXXXXXXXXXXXXX