Taxpayer receives IRA rollover waiver after adviser error

Plain-English summary

A taxpayer received an IRA distribution and intended to return it before the 60-day rollover deadline. A financial adviser provided a written deadline that was one day late, and the taxpayer relied on that advice when returning the funds. The taxpayer learned of the missed deadline only after receiving an IRS assessment and then removed the amount from the IRA. The IRS found the documentation consistent with an adviser error, waived the original 60-day requirement, and gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA. The relief does not cover any required minimum distribution.

Ruling snapshot

• Question: Will the IRS waive the 60-day IRA rollover deadline missed because of the financial adviser's incorrect advice?
• Outcome: Approved. The taxpayer received 60 days from the ruling date to complete the rollover.
• Key authorities: IRC § 408(d)(3)(I); 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

JAN 22 2014

201416014

SE:T:EP:RA:T2

Uniform Issue List: 408.03-00

Legend:

Taxpayer = ***
IRA X = ***
Amount 1 = ***
Financial Institution = ***
Financial Advisor = ***
Dear ***:

This is in response to your request dated October 25, 2012, as supplemented by correspondence dated August 8, 2013, and November 21, 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 penalties of perjury in support of the ruling requested.

Taxpayer represents that she received a distribution from IRA X totaling Amount 1. Taxpayer 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 Financial Advisor in providing the incorrect rollover deadline date to Taxpayer.

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Taxpayer represents that she is the owner of IRA X maintained at Financial Institution. On December 4, 2009, Taxpayer received a distribution from IRA X of Amount 1. Taxpayer represents that it was always her intent to rollover Amount 1 back into IRA X by the 60-day rollover deadline. Taxpayer was informed in writing by an employee of Financial Advisor that Taxpayer needed to redeposit Amount 1 into IRA X by February 4, 2010, which was after the deadline. Taxpayer has been a longtime client of Financial Advisor and relied on Financial Advisor with regard to the rollover. On February 4, 2010, Taxpayer gave Financial Advisor a check for Amount 1, which was deposited back into IRA X.

Taxpayer did not become aware of her failure to meet the 60-day rollover deadline until she received an assessment from the Service dated October 31, 2011. Taxpayer then removed Amount 1 from IRA X.

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 Amount 1.

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) 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

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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) (related to required distributions under section 401(a)(9) of the Code and incidental death benefit requirements of section 401(a) of the Code).

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) 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.

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.

The information presented and documentation submitted by Taxpayer is consistent with her assertion that her failure to accomplish a timely rollover was due to an error committed by Financial Advisor in providing the incorrect rollover deadline date to Taxpayer.

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 1 from IRA X. Taxpayer is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 1 into a rollover IRA. Provided all other requirements of section 408(d)(3), except the 60-day requirement, are met with respect to such contribution, the contribution of Amount 1 will be considered a rollover contribution within the meaning of section 408(d)(3).

This ruling does not authorize the rollover of amounts that are required to be distributed by section 401(a)(9) of the Code (regarding required distributions).

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.

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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.

Pursuant to the power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative. If you wish to inquire about this ruling, please contact ** at () -**. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Jason Levine, Manager,
Employee Plans Technical Group 2

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose

cc: ***