Financial-institution confusion justified an IRA rollover waiver

Plain-English summary

An IRA owner invested through annuity contracts that remained inside his IRA, but transfers among brokers and later financial-institution acquisitions changed the account naming and stopped the related statements. Believing the annuities were no longer IRA assets, he cashed them out and moved the proceeds through two non-IRA accounts. He discovered the problem only after receiving a Form 1099 the next year. The IRS found that the missed deadline resulted from the institutional mergers, account-label confusion, and a representative's miscommunication, and it waived the 60-day rollover deadline. The ruling allowed 60 days to transfer up to Amount 1 into a rollover IRA. The conclusion refers to the waived distribution as Amount 2 even though the request and earlier discussion identify the distribution as Amount 1, so the official text contains an internal amount-label inconsistency.

Ruling snapshot

• Question: Could the taxpayer receive rollover relief after institutional changes and account mislabeling caused IRA annuity proceeds to enter non-IRA accounts?
• Outcome: Approved, with 60 days to transfer an amount not exceeding Amount 1 to a rollover IRA
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

201532041

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUN 11 2015

SE:T:EP:RA:T1

Uniform Issue List: 408.03-00

Legend:
Taxpayer A

IRA B

Financial institution C
Financial Institution D
Financial Institution E
Financial Institution F
Financial Institution G
Financial Institution H
Account I

Financial Institution J
Account K

Amount 1

Amount 2

201532041

Dear

This is in response to your request for a private letter ruling dated
December 31, 2014, as supplemented by correspondence dated April 15, 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 of Amount 1 from
IRA B. 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 Financial Institution G which eventually led to Amount 1
being placed in a non-IRA account. Taxpayer A further represents that Amount 1
has not been used for any other purpose.

Taxpayer A maintained IRA B with Financial Institution C. On May 8, 2008,
Taxpayer A decided to invest Amount 2 from IRA B in annuity contracts with
Financial Institution D, a member of the Financial Institution E family of
companies. The transaction was handled by a broker who worked for Financial
Institution C. In July of 2009, this individual moved from Financial Institution C to
Financial Institution F. Related to his broker changing jobs, Taxpayer A signed a
series of forms with Financial Institution F resulting in the transfer of his annuity
contracts to Financial Institution F. While still remaining in the IRA, this transfer
caused the name of the annuity contracts to change by removing Financial
Institution C, IRA Custodian/For, Taxpayer A as owner and substituting merely
Taxpayer A. Later in 2009, Financial Institution G acquired Financial Institution
F. Financial Institution G stopped sending Taxpayer A monthly statements from
Financial Institution D. Taxpayer A represents he had no way of knowing there
had been a change in the name of his IRA annuity contracts as Financial
Institution G failed to inform him they were still IRA annuities. Taxpayer A
asserts that he intended for the investment in the annuity contracts to continue
to held by an IRA.

In 2013, Taxpayer A hired a new broker with Financial Institution H. In
order to obtain a better rate of return on these funds, Taxpayer A cashed in the
annuity contracts on June 26, 2013. Since the name of the annuity contracts
was listed as Taxpayer A, and not designated as an IRA, the funds were
deposited into a non-IRA checking account with Financial Institution J. On July
10, 2013, Taxpayer A transferred Amount 2 in Account | to Account K, a non-IRA
account with Financial Institution H. The mistake was discovered when Taxpayer

Page 3 201532041
A received a 1099 in 2014, which showed the distribution of Amount 1 was from
an IRA.

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 1.

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
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)(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).

Page 4 201 532041

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 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
are consistent with his assertion that his failure to accomplish a timely rollover of
Amount 1 was caused by mergers/acquisitions of the financial institutions holding
his assets and a miscommunication with a representative of Financial Institution
G which led to Amount 1 being deposited into a non-IRA account.

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 2 from IRA B. Taxpayer A is granted a period of 60 days from the
issuance of this letter ruling to transfer an amount not to exceed Amount 1 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 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.

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.

Page 5

201532041

A copy of this letter ruling has been sent to your authorized representative
pursuant to a power of attorney on file in this office. If you wish to inquire about

this ruling, please contact

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

(.D. # ), ,at( )

Sincerely yours,

Carlton A. Watkins

Manager
Employee Plans Technical Group 1