IRS waives the 60-day IRA rollover deadline after a bank error

Plain-English summary

An individual intended to move money from a savings account to a checking account to buy a vehicle, but a bank representative instead processed an IRA distribution. The taxpayer had limited understanding of financial matters and did not learn of the bank's error until visiting an accountant months later. The IRS waived the 60-day rollover requirement under IRC § 408(d)(3)(I) and gave the taxpayer 60 days from the ruling date to contribute the available amount to a rollover IRA, subject to the other rollover rules. The ruling applies only to this taxpayer's facts.

Ruling snapshot

• Question: May the taxpayer roll over an IRA distribution after the 60-day period caused by a bank error?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); IRC § 72; IRC § 401(a)(9)

Full text (IRS public release)

201415013

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 16 2014

T:EP:RA:T3

U.I.L. 408.03-00

XXXXXXXXXXXXXXX

XXXXXXXXXXXXXXX

XXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXX

IRA X = XXXXXXXXXXXXXXX

Bank F = XXXXXXXXXXXXXXX

Amount D = XXXXXXXXXXXXXXX

Amount E = XXXXXXXXXXXXXXX

Dear XXXXXXXXXX:

This letter is in response to your letter dated May 7, 2013, as supplemented by
correspondence dated July 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 June 15, 2012, 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
an error committed by a representative of Bank B. Taxpayer A has Amount E
currently available to rollover.

201415013

On June 15, 2012, Taxpayer A went to Bank B and explained to a representative
of Bank B that he desired to move funds in his savings account to his checking
account to purchase a vehicle. Instead, the representative of Bank B completed
an IRA withdrawal statement and made an on-line transfer of Amount D to
Taxpayer A’s checking account. Taxpayer A has a mental impairment and limited
understanding of financial matters. He had relied upon his daughter to help him
understand financial matters until three years ago when she moved. Since that
time he has relied upon representatives of Bank B.

Taxpayer A relied upon a representative of Bank B to move the money from his
savings account and did not become aware of the Bank’s error until he visited
his accountant in March 2013.

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 Amount E.

Section 408(d)(1) of the Code provides that, except as otherwise provided in
section 408(d) of the Code, 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

(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

201415013

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 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.

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 an error committed by a representative of Bank B.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to Amount E. Taxpayer A is
granted a period of 60 days from the issuance of this letter ruling to contribute
Amount E into a rollover IRA. Provided all other requirements of Code section
408(d)(3), except the 60-day requirement, are met with respect to such
contribution, the contribution of Amount E 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 XXXXXXXXXXXXXXX at
XXXXXXXXXXXXXX. All correspondence should be addressed to SE:T:EP:RA:T3.

Sincerely yours,

[illegible]

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted copy of letter ruling
Notice 437