IRS waives IRA rollover deadline after erroneous financial advice

Plain-English summary

An IRA owner received several checks while closing an account for a rollover, but a financial advisor incorrectly said the process would take two to three months. The owner held the checks until the full distribution arrived, then learned that the 60-day rollover period had expired. The checks were never cashed, the financial institution stopped payment, and the entire amount was credited back to the IRA. The IRS found the late rollover resulted from reliance on erroneous financial advice and waived the 60-day requirement under IRC § 408(d)(3)(I). The credit back to the IRA was treated as a valid rollover contribution if all other rollover requirements were met.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover deadline after relying on erroneous financial advice?
• Outcome: Approved; the deadline was waived and the credited amount could qualify as a valid rollover
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

201508021

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 25 2014

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Taxpayer A =

IRA B =

Financial Institution C =

Bank D =

Amount 1 =

Amount 2 =

Amount 3 =

Dear :

This letter is in response to a letter dated June 27, 2014, as supplemented by
correspondence, dated August 27, 2014, in which you request a waiver of the 60-day
rollover requirement contained in section 408(d)(3) of the Internal Revenue Code
(“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 B totaling Amount 3.
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 erroneous advice concerning
the rollover process provided by a financial advisor with Financial Institution C.

Taxpayer A maintained IRA B with Financial Institution C. On October 23, 2013,
Taxpayer A met with a new financial advisor at Bank D to discuss his finances. The
financial advisor instructed Taxpayer A that if he wanted to roll over IRA B to Bank D,
Bank D would charge Taxpayer A to liquidate the holdings in IRA B. Instead, the
financial advisor instructed Taxpayer A to close his account with Financial Institution C.

201508021

Relying on this advice, Taxpayer A telephoned his financial advisor with Financial
Institution C and instructed him to close IRA B. Taxpayer A represents that he had
indicated to the financial advisor that he wished to close the account to complete a
rollover. Taxpayer A represents that the financial advisor informed him that due to the
nature of the investments, it would take two to three months to complete the transaction.
Shortly thereafter, Taxpayer A received a check for Amount 1 dated October 28, 2013.
After settlement of investment trades and receipt of interest income and dividends
Taxpayer A received 6 checks, totaling Amount 2, the final one on December 30, 2013,
after the expiration of the 60-day period. In all, Taxpayer A received a total distribution
of Amount 3.

Relying on the advice of the financial advisor with Financial Institution C that it would
take two to three months to close IRA B, Taxpayer A held the checks until he received a
full distribution of the proceeds of IRA B. Taxpayer A represents that he believed he
had enough time to roll the checks into a new account at Bank D, because the checks
indicated that they were valid for 180 days. Taxpayer A represents that he met with a
representative of Bank D on January 28, 2014, at which time he presented the checks
for deposit. Understanding that the 60-day period had passed, the representative
immediately contacted Financial Institution C, who agreed to stop payment on the
checks. Taxpayer A has provided copies of account statements for IRA B that show
stopped payments of the checks effective January 30, 2014, and which show that
Financial Institution C has treated Amount 3 as being rolled back into IRA B. Taxpayer
A represents that Amount 3 remains in IRA B. Taxpayer A received Form 1099-R
indicating that Amount 3 was an IRA distribution, but Financial Institution C has
indicated that it will issue a Form 5498 to Taxpayer A for 2014 that will show it treated
the credit of Amount 3 as a rollover.

Based upon the foregoing facts and representations, you request that the Service waive
the 60-day rollover requirement with respect to the distribution of Amount 3 from IRA B.

Section 408(d)(1) of the Code provides that, except as otherwise provided in section
408(d) of the Code, 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

201508021

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).

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 under section
408(d)(3)(I), the IRS 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 or 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 3 was
caused by his reliance on the erroneous advice he received from his financial advisor at
Financial Institution C.

201508021

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 3 from IRA B.
Provided all other requirements of section 408(d)(3) of the Code, except the 60-day
requirement, are met with respect to Amount 3, the stop payment and credit of Amount
3 to IRA B on January 30, 2014, will be considered a valid rollover contribution.

No opinion is expressed as to the tax treatment of the transactions 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 that requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited by others as precedent.

If you have any questions, please contact (I.D. # ) by
phone at or fax at . Please address all correspondence to
SE:T:EP:RA:T1.

Sincerely yours,

[signature]

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose