IRS declines to waive the 60-day IRA rollover requirement

Plain-English summary

An individual asked the IRS to waive the 60-day deadline for rolling a distribution from an IRA into another IRA. The individual said the financial institution distributed the amount after notifying the individual about delinquent custodial fees, even though the individual did not intend to take a distribution, and said the amount had not been used. The IRS explained that waivers are available when a listed circumstance, such as a financial institution error, prevents a timely rollover. The IRS declined the request because the facts presented did not show that one of those circumstances prevented the rollover.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement for the distribution from IRA Y?
• Outcome: Denied
• Key authorities: IRC §§ 72, 408(d)(1), 408(d)(3), 408(d)(3)(A), 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

201411048

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 16 2013

Uniform Issue List: 408.03-00

XXX
XXX
XXX
T:EP:RA:T2

Legend:

Taxpayer = XXX
IRA Y = XXX
Financial Institution C = XXX
Amount A = XXX

Dear XXX:

This letter is in response to your request dated October 28, 2012, as supplemented by correspondence dated February 15, 2013, February 20, 2013, and May 31, 2013, in which you request a waiver of the 60-day rollover period 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 represents that his failure to accomplish a rollover of Amount A from IRA Y within the 60-day period prescribed by section 408(d) of the Code was due to his lack of intent to receive a distribution from IRA Y and subsequent lack of preparation to complete the rollover. Taxpayer asserts that Amount A has not been used for any purpose.

Taxpayer maintained IRA Y at Financial Institution C. Taxpayer asserts that he did not intend to receive a distribution from IRA Y. On May 17, 2011, Financial Institution C notified Taxpayer that he was delinquent in the payment of custodial fees for IRA Y. On June 16, 2011, Financial Institution C distributed Amount A from IRA Y to Taxpayer. Financial Institution C then sent notice of the distribution to Taxpayer dated August 30, 2011. Taxpayer asserts that because he lacked intent to take a distribution of Amount A from IRA Y, he also lacked preparation to complete the rollover within the relevant 60-day period, and failed to complete a rollover during that time. Taxpayer represents that Amount A has not been used for any other purpose.

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Based on the facts and representations, Taxpayer requests 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 A.

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 section 408(d)(3)(A) 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.

Revenue Procedure 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) 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.

3 201411048

The Service has the authority to waive the 60-day rollover requirement for a distribution from an IRA where the individual failed to complete a rollover to another IRA within the 60-day rollover period but was prevented from doing so because of one of the factors enumerated in Rev. Proc. 2003-16, for example, errors committed by a financial institution, death, hospitalization, postal error, incarceration, and/or disability. The Taxpayers have asserted that Credit Union E did not inform them of the 60-day rollover requirement. However, the Taxpayers also acknowledge that Credit Union E had them complete withdrawal forms that stated the 60-day rollover requirement. Accordingly, we find that the Taxpayers have not alleged that any of the factors enumerated in Rev. Proc. 2003-16 prevented them from timely completing the rollover.

Therefore, the Service hereby declines to waive the 60-day rollover requirement with respect to the distribution of Amount A from IRA Y.

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, contact XXX 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 Disclosure