Taxpayer received an IRA rollover waiver after relying on a financial advisor

Plain-English summary

A taxpayer withdrew money from an individual retirement account after a financial advisor said it would be invested in another tax-qualified retirement plan. Months later, the taxpayer discovered that the destination account was not designated as an IRA and had missed the ordinary 60-day rollover deadline. The IRS found the documentation consistent with the taxpayer's reliance on the advisor and waived the deadline under section 408(d)(3). It granted another 60 days from the ruling date to contribute the amount to a rollover IRA. All other rollover requirements still had to be met, and required minimum distributions remained ineligible for rollover.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover deadline after relying on a financial advisor?
• Outcome: Approved. The taxpayer received 60 days from the ruling date to complete the rollover.
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201424029

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND

GOVERNMENT ENTITIES MAR 21 2014

DIVISION

SE:T:EP:RA:T3

Uniform Issue List: 408.03-00

XXX
XXX

XXX

Legend:

Taxpayer = XXX
Amount = XXX
Financial Advisor = XXX
Financial Institution = XXX
IRA = XXX
Account = XXX
Dear XXX:

This is in response to your request submitted on your behalf by your authorized representative dated June 17, 2013, as supplemented by correspondence dated December 14, 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.

On September 10, 2012, Taxpayer received a distribution of Amount from IRA. Taxpayer asserts that her failure to accomplish a rollover of Amount within the 60-day

2 201424029

period prescribed by section 408(d)(3) of the Code was due to her reliance on Financial Advisor of Financial Institution.

Upon the advice of Financial Advisor, Taxpayer took a distribution of Amount from IRA on September 10, 2012. Taxpayer represents that she relied on Financial Advisor that the distribution of Amount would be invested in another tax qualified retirement plan. Taxpayer contacted Financial Advisor in mid-January 2013, after she noted that Account was not designated as an IRA account. Financial Advisor has provided a statement regarding the distribution of Amount and the subsequent investment of Amount.

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

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.

3 201424029

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.

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 of Amount was caused by her reliance on Financial Advisor, resulting in the failure to deposit Amount into another IRA within 60 days after being distributed from IRA.

Therefore, pursuant to section 408(d)(3)(A) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount from IRA. Taxpayer is granted a period of 60 days from the issuance of this letter ruling to contribute Amount 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 of Amount 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 408(a)(6) 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 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.

A copy of this letter ruling has been sent to your authorized representative pursuant to a power of attorney on file in this office.

4 201424029

If you wish to inquire about this ruling, please 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 Disclose

cc:
XXX
XXX
XXX