Bank deposit error justified IRA rollover waiver

Plain-English summary

An IRA owner intended to roll over the proceeds of a matured certificate of deposit into a new IRA at the same bank. A bank representative mistakenly deposited the funds into a non-IRA account instead. The funds remained unused in that account, and the bank acknowledged its processing error. The IRS waived the 60-day rollover deadline and gave the owner 60 days from the ruling’s issuance to contribute the amount to a rollover IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Could the IRA owner receive a rollover waiver after the bank deposited the funds into a non-IRA account?
• Outcome: Approved, with 60 days to complete the rollover
• 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

201530025

TAX EXEMPT AND
GOVERNMENT ENTITIES

SE:T:EP:RA:T2

APR 27 2015
U.I.L. 408.03-00
XXXXXXXXAXXXAXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
Legend:
Taxpayer A = XXXXXXXXXXXX
IRA X = XXXXXXXXXXXX
Individual M = XXXXXXXXXXXX
Bank C = XXXXXXXXXXXX
Amount E = XXXXXXXXXXXX
Account Y = XXXXXXXXXXXX

Dear xxxxxx:

This is in response to your request dated September 2, 2014, as supplemented
by correspondence dated November 13, 2014, and February 4, 2015, submitted
on your behalf, by 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.

On January 9, 2012, Taxpayer A received a distribution of Amount E from IRA X
with the intent to rollover Amount E into a rollover IRA with Bank C. Taxpayer A
asserts that his failure to accomplish a rollover of Amount E within the 60-day

2 201530025

period prescribed by section 408(d)(3) of the Code was due to an error
committed by Individual M of Bank C.

IRA X was invested in a Certificate of Deposit (CD) with Bank C. On January 9,
2012, when the CD in IRA X matured, Taxpayer A met with Individual M of Bank
C to initiate the rollover of Amount E into a new rollover IRA. However, Individual
M of Bank C inadvertently deposited Amount E into Account Y (a non-IRA
account in Bank C). Amount E has not been used for any other purpose and
remains in Account Y.

Documentation submitted by Bank C acknowledges that an error occurred when
the transaction was processed by a representative of Bank C.

Based on the foregoing 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 Amount E.

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

(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)

3 201530025

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 and documentation submitted by Taxpayer A is
consistent with his assertion that his failure to accomplish a timely rollover was
caused by an error committed by Individual M of Bank C.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to Amount E. Taxpayer A is
granted a period of 60 days from the issuance of this letter ruling to contribute
Amount E into a rollover IRA. Provided all other requirements of Code section
408(d)(3), except the 60-day requirement, are met with respect to such
contribution, the contribution of Amount E 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 transactions described
herein under the provisions of any other section of either the Code or regulations,
which may be applicable thereto.

4 201530025

A copy of this letter is being sent to your authorized representative pursuant to a
power of attorney on file in this office.

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 xxxxxxxxxxx,
XXXXXXXXXXXX, at XXXXXXXXXXXXX. All correspondence should be addressed to
SE:T:EP:RA:T2.

Sincerely yours,

Sherri M. Edelman, Manager

Employee Plans Technical Group 2

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

cc:
XXXXXXXXXXXXXXX