Website redirection justified IRA rollover waiver

Plain-English summary

An IRA owner tried to move her account to a new rollover IRA offering a better interest rate. After becoming disconnected from one financial institution’s website, she was redirected to another institution’s site and unknowingly opened a non-IRA certificate of deposit. She did not discover the mistake until months later and represented that the distributed amount had not been used for any other purpose. The IRS found the documentation consistent with a website misdirection and waived the 60-day rollover deadline. It gave her 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 website redirection caused the funds to enter 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

201531025

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAY 05 2015

SE:T:EP:RA:T2

Uniform Issue List: 408.03-00

Legend:

Taxpayer A:

IRA X:

Financial Institution B:
Financial Institution C:
Financial Institution D:

Amount E:

Dear :

This is in response to your request, dated October 31, 2014, in which you
requested 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 she received a distribution from IRA X, at Financial
Institution D, totaling Amount E. Taxpayer A asserts that her failure to accomplish a
rollover within the 60-day period prescribed by section 408(d)(3) was due to a
misdirection within Financial B’s website which caused an unintended deposit to a non-
IRA account. Taxpayer A further represents that Amount E has not been used for any
other purpose.

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On February 27, 2014, Taxpayer A attempted to rollover IRA X to an Individual
Retirement Account (“IRA”) at Financial Institution B to obtain a more favorable interest
rate. However, Amount E, was unintentionally electronically transferred to Financial
Institution C and the funds were deposited into a non-IRA account. Taxpayer A
represents that she attempted to open the rollover IRA at Financial Institution B through
Financial Institution B’s website, became disconnected and was then redirected to
Financial Institution C’s website where she opened what she believed was a rollover
IRA. New account information was provided to Financial Institution D and an electronic
transfer was made. The withdrawal authorization indicated that the account to which
Amount E was to be transferred was an IRA.

In August 2014, Taxpayer A attempted to open a regular Certificate of Deposit
(“CD”) account at Financial Institution C. She was told that she had an existing non-IRA
CD account with a balance of Amount E with interest earnings. It was then that she
realized that the rollover IRA had not been opened at Financial Institution B. Taxpayer A
contacted individuals at both Financial Institution B and Financial Institution C but was
told they could not correct the mistake.

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

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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)(d)(3)(E) of the Code provides that the rollover provisions of
408(d) do not apply to any amount required to be distributed under section 401(a)(9) of
the Code.

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.

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 her assertion that her failure to accomplish a rollover of Amount E within
the 60-day period prescribed by section 408(d)(3) of the Code was due to a misdirection
within Financial B’s website which caused an unintended deposit to a non-IRA account
at Financial Institution C.

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 E from
IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount E 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, 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 401(a)(9) 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 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 wish to inquire about this ruling, please contact *. Please address all
correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Sherri M. Edelman, Manager,
Employee Plans Technical Group 2
Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose