Delayed notice of reversed IRA deposit justified rollover waiver

Plain-English summary

A taxpayer deposited a distribution back into her IRA within 60 days and confirmed online that the redeposit had been accepted. The check was later returned because of confusion about the bank account on which it was drawn, but the custodian’s mailed notice did not reach the taxpayer until after the deadline because she had moved. She promptly supplied a replacement check after receiving the notice. The IRS concluded that the late rollover resulted from the custodian’s failure to notify her timely, waived the deadline, and treated the replacement deposit as a rollover contribution.

Ruling snapshot

• Request: Waive the 60-day deadline after a timely IRA redeposit was reversed without prompt notice
• Outcome: Approved; the replacement redeposit was treated as a rollover
• Key authorities: I.R.C. § 408(d)(3); 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

JUL 22 2015                                      201542008

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:

Taxpayer A =
IRA B =

Custodian C =

Financial Institution D =
Amount 1 =
Dear             :

This is in response to a letter dated October 3, 2014, as supplemented by
a letter dated May 21, 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.

Taxpayer A represents that she received a distribution from IRA B totaling
Amount 1. Taxpayer asserts that her failure to complete a rollover of Amount 1
within the 60-day period prescribed by section 408(d)(3) of the Code was due to
the failure of Custodian C to notify Taxpayer A that the redeposit of Amount 1
within the 60-day period, had been reversed.

On April 23, 2013, Taxpayer A received a distribution of Amount 1 with the
intent to complete a timely rollover back into IRA B. On June 14, 2013, Taxpayer
A deposited a check in Amount 1 into IRA B. On June 15, 2013, an on-line
inquiry confirmed that Amount 1 was accepted as a redeposit into IRA B.


Page 2                                          201542008

However, due to confusion concerning the account the check was drawn on with
Financial Institution D, the check was returned due to the account being closed.

Custodian C did not immediately notify Taxpayer A that the deposit had
been reversed. Instead, Custodian C issued a letter dated June 19, 2013,
notifying Taxpayer A that the deposit into IRA B, on June 14, 2013, was being
reversed. However, due to the relocation of Taxpayer A’s residence, the letter
was not received by Taxpayer A until several weeks after the expiration of the
60-day period. Upon receipt of the June 19, 2015, letter, Taxpayer A immediately
arranged for a replacement check which was deposited into IRA B on July 24,
2013. Taxpayer A has submitted a letter from Financial Institution D which
substantiates the confusion over the accounts the check was drawn on.

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) of the Code with respect to the distribution of
Amount B.

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


Page 3                                          201542008

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).

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) of the Code, 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 her assertion that her failure to accomplish a timely rollover was
due to the failure of Custodian C to timely notify Taxpayer A of the reversal of the
June 14, 2014, deposit into IRA 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 1 from IRA B. Provided all other requirements of section 408(d)(3) of the
Code were met, except the 60-day requirement, the redeposit of Amount 1 on
July 24, 2013, will be considered a rollover contribution within the meaning of
section 408(d)(3)(A) 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.


Page 4                                          201542008

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.

A copy of this letter has been sent to your authorized representative in
accordance with a power of attorney on file in this office.

If you have any questions, please contact (Identification
Number ) at . Please address all correspondence to
SE:T:EP:RA:T1.

Sincerely yours,

Carlton Watkins, Manager,
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose

CC: