Bank's business-day advice justified IRA rollover waiver

Plain-English summary

An IRA owner received a distribution when a certificate of deposit matured and asked a bank manager how long she had to complete a rollover. The manager incorrectly told her the deadline was 60 business days rather than 60 calendar days and later confirmed that advice in writing. The owner relied on the advice and deposited the full amount into another IRA within 60 business days, but after the statutory deadline. The IRS found that the late rollover resulted from the bank's misleading information and waived the 60-day requirement.

Ruling snapshot

• Question: May the IRA owner receive a waiver after a bank manager incorrectly described the rollover deadline as 60 business days?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

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

201527050

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

APR 06 2015

T:EP:RA:T3

U.I.L. 408.03-00

XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXX
IRA Y = XXXXXXXXXXXXXXXX
Bank B = XXXXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXXXX
Individual M = XXXXXXXXXXXXXXXX

Dear XXXXXXXXXXXX:

This letter is in response to your request dated November 28, 2014, as
supplemented by correspondence dated February 6, 2015, 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.

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Taxpayer A received a distribution of Amount D on September 10, 2014, from
IRA X with the intent to rollover Amount D into a rollover IRA. Taxpayer A asserts
that her failure to accomplish a rollover of Amount D within the 60-day period
prescribed by section 408(d)(3) of the Code was due to the misleading
information provided by Individual M of Bank B.

IRA X was invested in a five-year Certificate of Deposit (CD). On September 10,
2014, when the CD matured, Taxpayer A went to Bank B and requested a
distribution of Amount D in the form of a certified check. At that time, Taxpayer A
represents that she asked the Branch Manager, Individual M, of Bank B, how
many days she had to rollover Amount D into another IRA. Individual M told her
that she had 60 days to roll it over into another IRA. Taxpayer A represents that
she asked Individual M to confirm if it was 60 business days or 60 calendar days
and Individual M responded that it was 60 business days. Taxpayer A represents
that she relied upon the advice of Individual M of Bank B. Individual M of Bank B
has provided a letter confirming Taxpayer A’s assertions.

Taxpayer A further represents that during the 60-day period, she had three visits
in Bank B for other transactions. If she had known of the 60 calendar day rollover
period, she would have deposited Amount D into a rollover IRA within the 60-day
rollover period. Instead, pursuant to the advice of Individual M, on November 24,
2014, Taxpayer A deposited Amount D within 60 business days, in a five-year
CD in IRA Y with Bank B.

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

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 received the payment or
distribution; or

3 201527050

(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 included 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, 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 by Taxpayer A and the letter from Bank B are
consistent with the assertions that the failure to accomplish a timely rollover was
due to misleading information provided by Individual M of Bank B.

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
D from IRA X. Provided all other requirements of Code section 408(d)(3), except

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the 60-day requirement, are met with respect to such contribution, the
contribution of Amount D into IRA Y will be considered a rollover contribution
within the meaning of section 408(d)(3) of the Code.

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.

If you have any questions concerning this ruling, please contact XXXXXXXXXXXXX
XXXXXXXXXXXXX SE:T:EP:RA:T:2, at XXXXXXXXXXXXXXX.

Sincerely yours,

Sherri M. Edelman, Manager
Employee Plans Technical Group 2

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