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: