IRA rollover deadline waived after deposit directive error

Plain-English summary

An IRA owner withdrew funds to change investments and obtain a better rate of return. After subtracting the required minimum distribution, the owner instructed a financial institution to place the remaining amount in an IRA within 60 days. The institution instead deposited the money into a non-IRA account because of a deposit directive oversight, and the funds were not used for another purpose. The IRS found the documentation consistent with the owner's account and waived the 60-day rollover deadline. It allowed 60 days from the ruling date to transfer up to the eligible amount into a rollover IRA, but did not permit rollover of any required minimum distribution.

Ruling snapshot

• Question: Could the taxpayer receive a waiver after a financial institution placed intended rollover funds in a non-IRA account?
• Outcome: Approved, with 60 days from the ruling date to complete the rollover.
• Key authorities: IRC §§ 401(a)(9) and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201521023

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

FEB 2 3 2015

Uniform Issue List: 408.03-00

TEP:RA:T1

Legend:

Taxpayer A =
IRA B =
Financial Institution C =
Account D =
Financial Institution E =
Amount 1 =
Amount 2 =
Amount 3 =

Dear :

This letter is in response to your letter dated June 5, 2014, as supplemented by
correspondence dated October 30, November 5, and December 15, 2014, from
your authorized representative, 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 took a distribution of Amount 1 from

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IRA B. Taxpayer A asserts that his failure to accomplish a rollover of Amount 3
within the 60-day period prescribed by Code section 408(d)(3) was due to the
failure of Financial Institution E to place the funds in an IRA as instructed by
Taxpayer A. Taxpayer A further represents that Amount 3 has not been used for
any other purpose.

Taxpayer A maintained IRA B, an individual retirement account (IRA) under
section 408 of the Code, with Financial Institution C. Taxpayer A represents that,
on February 25, 2013, in order to change investments and obtain a better rate of
return, he withdrew Amount 1 from IRA B. Taxpayer A asserts that he gave
verbal instructions to an individual at Financial Institution E that Amount 3
(Amount 1 less his required minimum distribution of Amount 2) was to be
deposited into an IRA. A check for Amount 3 was then mailed to Financial
Institution E with the intention that it be deposited into an IRA within the 60-day
period. However, it was deposited into Account D, a non-IRA account. The
ruling request is accompanied by a letter from Financial Institution E stating that
the deposit of Amount 3 into Account D was due to a deposit investment directive
oversight between itself and Taxpayer A, who does have managed IRA
accounts.

Based on the above facts and representations, you request 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 3.

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)).

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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.

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), 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 the documentation submitted by Taxpayer A is
consistent with his assertion that his failure to accomplish a timely rollover of
Amount 3 was due to a deposit investment directive oversight by a money
manager at Financial Institution E.

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. Taxpayer A is granted a period of 60 days from the
issuance of this letter ruling to transfer an amount not to exceed Amount 3 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 contribution, the
contribution will be considered a rollover contribution within the meaning of
section 408(d)(3) of the Code.

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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.

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

Sincerely yours,

[illegible signature]
Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437

cc: