Failed custodian notice qualifies for IRA rollover relief

Plain-English summary

An IRA custodian resigned and mailed notice to a taxpayer's former address. When she did not respond, the institution transferred the IRA assets to another financial institution, which placed them in a non-IRA account. The taxpayer did not receive the earlier notice until months later and promptly learned what had happened. She had not used the assets for another purpose, and the receiving institution agreed to serve as IRA custodian if relief was granted. The IRS found that failed notification caused by postal delivery error led to the missed deadline and waived the 60-day rollover requirement.

Ruling snapshot

• Question: Could the taxpayer receive rollover relief after a custodian's resignation notice went to her former address?
• Outcome: Approved, the 60-day rollover deadline was waived.
• Key authorities: IRC §§ 408(a) and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201519040

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 10 2015

Uniform Issue List: 408.03-00

T:EP:RA:T1

Legend
Taxpayer A =

IRA B =

Financial Institution C =

Account D =

Financial Institution E =

City X =

City Y =

Amount 1 =

Dear

This is in response to your request dated September 8, 2014, as supplemented
by correspondence dated January 8, 2015, in which you request, through your
authorized representative, 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 she received a distribution equal to Amount 1 from
IRA B, which was maintained by Financial Institution C. Taxpayer A asserts that
her failure to accomplish a rollover within the 60-day period prescribed by section
408(d)(3)(A) of the Code was due to her failure to receive notification that
Financial Institution C would no longer serve as the custodian for IRA B.

2

201519040

Taxpayer A maintained IRA B with Financial Institution C. In late 2013, Financial
Institution C attempted to contact Taxpayer A to inform her of their resignation as
custodian of IRA B effective December 31, 2013. This notice was sent to
Taxpayer A’s last known address in City X. Taxpayer A never received the
notice from Financial Institution C because she had moved to another address in
City Y. When Taxpayer A did not respond to the notice, Financial Institution C
transferred IRA B to Financial Institution E which placed Amount 1 in Account D,
a non-IRA account.

In August 2014, Taxpayer A received the 2013 notice from Financial Institution C
at her new address in City Y. Taxpayer A represents that she does not know
why Financial Institution C did not have her correct address in 2013 nor how they
finally were able to send her the 2013 notice in August, 2014. When Taxpayer A
received the notice she contacted Financial Institution C who informed her that
IRA B had been transferred to Financial Institution E and placed in a non-IRA
account.

Taxpayer A represents that the assets in IRA B have not been used for any other
purpose. Taxpayer A also represents that Financial Institution E has agreed to
serve as an IRA custodian if Taxpayer A receives a waiver from the Service.

Based on the above facts and representations, Taxpayer A requests a waiver of
the 60-day requirement contained in section 408(d)(3) of the Code with respect
to the distribution of Amount 1 from IRA B.

Section 408(a) of the Code defines an IRA to mean a trust created or organized
in the United States, and requires that the trustee be a bank or an approved non-
bank trustee.

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.

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 or 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

3 201519040

(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.

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 of the Treasury 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, provides that the Service will issue a
ruling waiving the 60-day rollover requirement in cases 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 taxpayer.
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 are
consistent with her assertion that the failure to complete a rollover of the
distribution of Amount 1 from IRA B was due to a failed notification of the
distribution because of a postal delivery error.

4

201519040

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the
60-day rollover period with respect to Amount 1. Provided all other requirements
of section 408(d)(3), except the 60-day requirement, will be met with respect to
the contribution of Amount 1 to an IRA, Amount 1 will be considered a rollover
contribution with the meaning of section 408(d)(3).

This ruling does not authorize the rollover of amounts that are required to be
distributed by section 408(a)(6) 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.

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

If you wish to inquire about this ruling, please contact
(I.D. # ) at Please address all correspondence to

SE:T:EP:RA:T1.

Sincerely yours,

Carlton A. Watkins

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

cc: