IRA rollover waiver granted after institution delayed funds

Plain-English summary

An IRA owner withdrew funds intending to roll part of the distribution into another IRA within 60 days. Representatives of a financial institution assured him that their proposed arrangement would make enough funds available before the deadline. The institution failed to make the funds available on time, contrary to that advice, and the owner represented that the rollover amount had not been used for another purpose. The IRS waived the deadline because the missed rollover resulted from the institution's erroneous information.

Ruling snapshot

• Question: Should the IRS waive the 60-day rollover deadline when the financial institution failed to make funds available as promised?
• Outcome: Approved
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201440031

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 08 2014

SE:T:EP:RA:T2

Uniform Issue List: 408.03-00

Legend:
Taxpayer = * * *
IRA = * * *
Amount A = * * *
Amount B = * * *
Financial Institution = * * *

Dear * * *:

This is in response to your letter dated June 5, 2013, and supplemented
by correspondence dated August 16, 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 represents that he received a distribution from IRA totaling
Amount A. Taxpayer asserts that his failure to complete a rollover of Amount B,
a portion of Amount A, within the 60-day period prescribed by section 408(d)(3)
of the Code was due to erroneous information provided by representatives of
Financial Institution, which caused the funds to be unavailable for rollover.
Taxpayer further represents that Amount B has not been used for any other

purpose.

On August 23, 2012, Taxpayer withdrew Amount A from IRA with the
intent to complete a rollover of Amount B within 60 days. Taxpayer discussed his
intent to complete a rollover of Amount B with representatives of Financial
Institution and was assured that the plan proposed by Financial Institution would
result in sufficient funds being available to complete a rollover by the 60-day
deadline. However, Financial Institution was unable to make the funds available
by the 60th day contrary to the information and plan provided earlier by Financial
Institution’s representatives and upon which Taxpayer relied.

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

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 60
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) of the Code).

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) of the Code.

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.

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) 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 his assertion that his failure to accomplish a timely rollover was
due to the erroneous information he received from representatives of Financial
Institution.

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 B from IRA. Provided all other requirements of section 408(d)(3) of the
Code, except the 60-day requirement, were met with respect to the contribution
of Amount B to IRA, such contribution will be considered a valid 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.

If you have any questions, please contact * * *.
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