IRS denies rollover waiver for business-day deadline mistake

Plain-English summary

A taxpayer withdrew funds from an IRA to pay off a home mortgage and intended to replace the funds within 60 business days. She made two deposits after the actual 60-calendar-day rollover period had expired, withholding the portion she treated as her required minimum distribution. The taxpayer asked the IRS to waive the deadline because she misunderstood how the 60 days were counted. The IRS explained that waiver decisions consider circumstances such as financial-institution error, death, disability, hospitalization, incarceration, foreign restrictions, or postal error. Because the taxpayer cited none of those factors and the delay resulted from her own mistaken belief, the IRS declined to waive the deadline.

Ruling snapshot

• Question: Would the IRS waive the 60-day IRA rollover deadline when the taxpayer mistakenly counted business days instead of calendar days?
• Outcome: Denied
• Key authorities: IRC §§ 408(d)(3)(A), (D), and (I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201449009
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 11 2014

SE:T:EP:RA:2

Uniform Issue List: 408.03-00

Legend:
Taxpayer =

IRA =

Amount A =
Amount B =
Amount C =

Amount D =

Dear ,

This is in response to your request, dated February 25, 2013, as supplemented
by correspondence dated May 30, 2013, and November 6, 2013, in which your
authorized representative, on your behalf, requested 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 on August 2, 2010,
of Amount A. Taxpayer asserts that her failure to accomplish a rollover within the 60
day period prescribed by Section 408(d)(3) of the Code was due to her belief that the 60
day period was calculated based on business days instead of calendar days.

2 201449009

Amount A was used by Taxpayer to pay off a mortgage on her home. It was
Taxpayer's intent to return the funds to her IRA within 60 business days. On October 7,
2010, Taxpayer deposited Amount B to her IRA and on October 11, 2010, Taxpayer
deposited Amount C to her IRA. The total deposited, Amount D, was less than Amount
A distributed, the difference representing Taxpayer’s Required Minimum Distribution for
2010. The 60 rollover period ended October 1, 2010.

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 D.

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) 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) 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).

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).

3 201449009

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) 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 Service has the authority to waive the 60-day rollover requirement for a
distribution from an IRA where the individual failed to complete a rollover to another IRA
within the 60-day rollover period but was prevented from doing so because of one of the
factors enumerated in Rev. Proc. 2003-16; for example, errors committed by a financial
institution, death, hospitalization, postal error, incarceration, and/or disability. In the
present case, Taxpayer has not cited any of the enumerated factors as reason for her
failure to accomplish a rollover within the 60-day period.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service declines to
waive the 60-day rollover requirement with respect to the distribution of Amount A from
IRA.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

4 201449009

If you wish to inquire about this ruling, please contact *. Please address all
correspondence to SE:T:EP:RA:2.

Sincerely yours,

Jason E. Levine, Manager
Employee Plans Technical Group 2

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

cc: