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