Bank error receives 60-day IRA rollover waiver

Plain-English summary

An IRA owner's certificate of deposit matured, and she instructed a nearby financial institution to place the proceeds in a rollover IRA. The institution instead opened a certificate of deposit outside an IRA, contrary to her instructions. She discovered the error when asking about her first required minimum distribution and represented that she had not used the funds for any other purpose. The IRS found the documentation consistent with an institutional error and waived the 60-day rollover deadline. It granted her 60 days from the ruling date to contribute the amount to a rollover IRA, subject to all other § 408(d)(3) requirements.

Ruling snapshot

• Question: May the taxpayer receive a waiver after a financial institution placed IRA proceeds in a non-IRA certificate of deposit?
• Outcome: Approved. The taxpayer received 60 days 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

MAY 27 2014

SE:T:EP:RA:T2

Uniform Issue List: 408.03-00

Legend:

Taxpayer = ***
IRA X = ***
Amount = ***
Financial Institution A = ***
Financial Institution B = ***

Dear ***,

This is in response to your request dated March 25, 2011, submitted on your behalf by your authorized representative, as supplemented by correspondence dated September 4, 2012, July 16, 2013, July 29, 2013, April 3, 2014, and April 23, 2014, 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 represents that she received a distribution from IRA X totaling Amount. Taxpayer asserts that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to Financial Institution B failing to carry out a rollover transaction in a manner consistent with the intent of the instructions she provided. Taxpayer further represents that Amount has not been used for any other purpose.

On June 5, 2009, Taxpayer’s certificate of deposit matured within IRA X at Financial Institution A. Taxpayer decided to rollover IRA X to Financial Institution B, a financial institution closer to her home. Accordingly, Taxpayer withdrew Amount from Financial Institution A. The same day, Amount was deposited into a certificate of deposit at Financial Institution B, yet the certificate of deposit was not within a rollover IRA. Taxpayer asserts that this was contrary to her intent and instructions. Taxpayer intended to rollover IRA X into a rollover IRA at Financial Institution B. Taxpayer was made aware of the failure to accomplish the rollover IRA when she approached Financial Institution B regarding her 2010 required minimum distribution, her first required minimum distribution following the distribution of Amount.

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.

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 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 (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), 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 assertions that Financial Institution B failed to carry out a timely rollover transaction consistent with the intent of the instructions she provided

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 from IRA X. Taxpayer is granted a period of 60 days from the issuance of this ruling letter 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, 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 401(a)(9) 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 has been sent to your authorized representative in accordance with a power of attorney on file with this office.

If you wish to inquire about this ruling, please contact ** (ID # ) at () -*. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Jason E. Levine, Manager
Employee Plans Technical Group 2

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

Cc: ***