Lack of rollover information does not justify waiver

Plain-English summary

An IRA owner withdrew nondeductible contributions, moved the deductible portion and earnings to a retirement plan, and placed the remaining amount in a non-IRA credit-union account. He missed the 60-day rollover deadline because retirement required many decisions and he did not know that nondeductible IRA funds could be rolled into a Roth IRA. The money remained unused in the non-IRA account. The IRS found that these circumstances did not demonstrate any of the waiver factors in Rev. Proc. 2003-16 and declined to waive the deadline.

Ruling snapshot

• Question: Could the IRA owner receive a rollover waiver because retirement decisions and lack of information caused him to miss the deadline?
• Outcome: Denied
• 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

201545035

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 11 2015

U.I.L. 408.03-00

T:EP:RA:T2

XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXX

IRA X = XXXXXXXXX

Credit Union B = XXXXXXXX

Plan Y = XXXXXXXX

Amount D = XXXXXXXX

Dear xxxxxxxxx:

This is in response to your request dated December 16, 2014, as supplemented
by correspondence dated May 12, 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 December 30, 2013, Taxpayer A withdrew Amount D from IRA X. Taxpayer A
asserts that his 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 multitude of
decisions he had to make upon retirement and his lack of information on rolling
over nondeductible contributions from IRA X into a Roth IRA.

Taxpayer A represents that on December 30, 2013, he withdrew his
nondeductible contributions, Amount D, from IRA X and transferred Amount D
into a non-IRA account with Credit Union B. Taxpayer A represents that he had
rolled over the deductible contributions and interest from IRA X to his account in
Plan Y. Taxpayer A further represents that he only recently learned of the
possibility to rollover non-deductible funds to a Roth IRA, but was informed by
Credit Union B that the 60-day rollover period had passed. Amount D has not
been used for any other purpose and remains in a non-IRA account with Credit
Union B.

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 the distribution of Amount D from
IRA X.

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)
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 do not
demonstrate that Taxpayer A failed to accomplish a rollover due to any of the
factors cited in Rev. Proc. 2003-16.

Therefore, pursuant to section 408(d)(3) of the Code, the Service hereby
declines to waive the 60-day rollover requirement with respect to the distribution
of Amount D from IRA X.

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.

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 xxxxxxxxxx, at
xxxxxxxxxxx. All correspondence should be addressed to SE:T:EP:RA:T:2.

Sincerely yours,

Sherri M. Edelman, Manager
Employee Plans Technical Group 2

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

cc:
xxxxxxxxxx