Unintended duplicate IRA distribution receives rollover waiver

Plain-English summary

A taxpayer requested what he believed was his required minimum distribution from an IRA, unaware that the financial institution would also process an automatic in-kind distribution. His tax preparer discovered the duplicate distribution after the 60-day rollover period had expired, and the institution then restored the duplicate amount to the IRA. The IRS waived the deadline under IRC § 408(d)(3)(I) because the taxpayer did not know about the unintended duplicate distribution in time to complete a timely rollover. The waiver applied only if all other rollover requirements were met.

Ruling snapshot

• Question: Could an unintended duplicate IRA distribution be rolled back after the 60-day deadline?
• Outcome: Approved, subject to all other rollover requirements
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

201447055

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 11 2014

Uniform Issue List: 408.03-00

XXX
XXX
XXX

T:EP:RA:T3

Legend:

Taxpayer A = XXX
Amount B = XXX
Financial Institution C = XXX
IRA X = XXX

Dear XXX:

This is in response to your request submitted on your behalf by your authorized representative dated March 18, 2014, as supplemented by correspondence dated April 17, 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 A represents that he received a distribution from IRA X totaling Amount B. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to a miscommunication with Financial Institution C which resulted in an unintended duplicate required minimum distribution for the year 2013 that Taxpayer A was not aware of until after the expiration of the 60-day period. Taxpayer A further represents that Amount B has not been used for any other purpose.

On December 12, 2013, Taxpayer A, who is over age 70 1/2, believing that he was responsible for determining and distributing his required minimum distribution for the

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year, requested a distribution of Amount B from IRA X. Amount B was then deposited into a non-IRA money market fund at Financial Institution C. On December 28, 2013, Financial Institution C processed an automatic in-kind distribution of Amount B, which was transferred directly from IRA X to Taxpayer A’s individual brokerage account with Financial Institution C. Taxpayer A was unaware of the automatic in-kind transfer and therefore, unaware of the duplicate required minimum distribution that was processed.

On March 3, 2014, during preparation of Taxpayer A’s 2013 tax return, Taxpayer A’s tax preparer discovered the duplicate distribution reported on Taxpayer A’s 1099-R from Financial Institution C, and promptly communicated the discovery to Taxpayer A. Taxpayer A immediately contacted Financial Institution C who proceeded to restore the duplicate distribution by rolling Amount B back into IRA X, even though the 60-day period for completing the rollover had expired.

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 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 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).

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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.

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 A is consistent with his assertion that his failure to accomplish a timely rollover of Amount A was due to the fact that he was not aware of the unintended duplicate required minimum distribution until after the expiration of the 60-day rollover period.

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 X on December 26, 2014. 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 X on March 3, 2014, such contribution will be considered a rollover contribution within the meaning of section 408(d)(3) 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 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).

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.

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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