Bank miscommunication justified late IRA rollover

Plain-English summary

An IRA owner received a distribution from a bank certificate of deposit and intended to roll part of it into an IRA at another bank. The taxpayer met with the second bank’s representative, received an “IRA Managed Proposal,” selected a long-term income fund, and believed the rollover was complete. During tax preparation, the taxpayer discovered that the bank had instead opened a non-IRA account. The money had not been used for another purpose. The IRS found the evidence consistent with a bank miscommunication, waived the 60-day deadline, and gave the taxpayer 60 days from the ruling to contribute the amount to a rollover IRA.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover deadline when a bank representative placed the funds in a non-IRA account?
• Outcome: Approved, with 60 days from the ruling to complete the rollover
• Key authorities: IRC §§ 408(d)(3) and 401(a)(9); Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAR 13 2015

Uniform Issue List: 408.03-00

T:EP:RA:T1

Legend:
Taxpayer A =

IRA B =

Bank C =
Bank D =
Account E =
Amount 1 =

Amount 2 =

Dear

This is in response to a request for a letter ruling dated May 25, 2014, and
supplemented by correspondence dated February 13, 2015, 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 (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 totaling Amount 1 from IRA
B maintained by Bank C. Taxpayer A asserts that his failure to accomplish a
rollover within the 60-day period prescribed by section 408(d)(3) was due to a
miscommunication with a representative of Bank D which led to Amount 1 being

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placed in non-IRA Account E. Taxpayer A further represents that Amount 1 has
not been used for any other purpose.

Taxpayer A represents that he owned IRA B which was a CD maintained with
Bank C. The CD in IRA B was set to mature in October, 20 . On October 11,
20 , Taxpayer A went to Bank C and received a total distribution of Amount 1.
Seeking a higher rate of return, Taxpayer A intended to rollover Amount 2, a
portion of Amount 1, at Bank D. On October 15, 20 , Taxpayer A represents he
met with a representative and was presented with information regarding setting
up an IRA at Bank D to receive the rollover funds. Taxpayer A selected a long
term income fund and thought he had completed the rollover to an IRA at Bank
D. However, in 20 while his income taxes were being prepared it was
discovered that the account was a non-IRA account. The request for relief is
accompanied by the “IRA Managed Proposal” that was presented to Taxpayer A
by the representative of Bank D.

Based on the facts and representations, you request a ruling that the Internal
Revenue Service waive the 60-day rollover requirement contained in section
408(d)(3) of the Code with respect to the distribution of Amount 2 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 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)

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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 sections 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 documentation submitted by Taxpayer A are
consistent with his assertion that his failure to accomplish a timely rollover of
Amount 2 was caused by a miscommunication with a representative of Bank D
which led to Amount 2 to be deposited into a non-IRA account. Therefore,
Taxpayer A is granted a period of 60 days from the issuance of this ruling letter
to contribute Amount 2 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 of Amount 2 will be considered a
rollover contribution within the meaning of section 408(d)(3).

This ruling does not authorize the rollover of amounts that are required to be
distributed by section 401(a)(9) 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.

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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, Manager
Employee Plans Technical Group 1

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

cc: