Financial institution error justifies late IRA rollover

Plain-English summary

A taxpayer withdrew funds from an IRA intending to roll them into another qualified retirement account. Before the deadline, he instructed a financial institution to place the funds in an IRA certificate of deposit, but the institution instead deposited them into a non-IRA account. The institution acknowledged its error, and the taxpayer represented that the funds had not been used. The IRS waived the 60-day deadline under IRC § 408(d)(3)(I) and gave the taxpayer 60 days from the ruling letter to contribute the amount to a rollover IRA.

Ruling snapshot

• Question: Could a financial institution's deposit error excuse a missed IRA rollover deadline?
• Outcome: Approved, with 60 days from the ruling letter to complete the rollover
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

201447053

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 10 2014

Uniform Issue List: 408.03-00

T:EP:RA:T3

XXX
XXX
XXX

Legend:

Taxpayer A = XXX
IRA X = XXX
Account Y = XXX
Financial Institution B = XXX
Financial Institution C = XXX
Amount 1 = XXX

Dear XXX:

This letter is in response to your request on July 1, 2014, as supplemented by
correspondence dated August 15, 2014, in which you request a waiver of the 60-day
rollover period contained in section 408(d)(3) of the Internal Revenue Code (the
"Code").

Taxpayer A represents that he received a distribution of Amount 1 from IRA X on April
2, 2013. Taxpayer A represents that his failure to accomplish a rollover of Amount 1
from IRA X within the 60-day period prescribed by section 408(d) of the Code was due
to an error by Financial Institution C.

The following facts and representations have been submitted under penalty of perjury in
support of the ruling requested:

2 201447053

Taxpayer A maintained an individual retirement account (IRA), IRA X, at Financial
Institution B. Taxpayer A represents that he withdrew Amount 1 from IRA X on April 2,
2013 with the intention of rolling it over into another tax qualified retirement account. On
May 23, 2013, Taxpayer A instructed Financial Institution C to deposit Amount 1 into an
IRA certificate of deposit account. Financial Institution C instead deposited Amount 1
into Account Y, a non-IRA account. Taxpayer A has provided a letter from Financial
Institution C in which it admits making an error in failing to deposit Amount 1 into an
IRA, as instructed. Taxpayer A asserts that Amount 1 has not been used for any
purpose.

Based on the facts and representations, Taxpayer A requests 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 from IRA X.

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 201447053

Section 408(d)(3)(E) of the Code provides that the rollover provisions of section 408(d)
of the Code do not apply to any amount required to be distributed under section
408(a)(6) 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) 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 submitted by Taxpayer A is consistent with the assertion
that Taxpayer A's inability to complete a timely rollover was due to an error by Financial
Institution C.

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 A is granted a period of 60 days from the issuance of this letter ruling to
contribute Amount 1 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
contributions, Amount 1 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 (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.

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.

4 201447053

If you wish to inquire about this ruling, 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 Disclosure

cc:
XXX