Bank's non-IRA CD deposit qualifies for rollover waiver

Plain-English summary

An IRA owner held an IRA certificate of deposit at a bank that later failed and was taken over by another bank. When the CD matured, he closed it intending to complete a rollover into a new IRA CD at a third bank, but that bank placed the money in a non-IRA CD account. He did not discover the mistake until he received a later Form 1099-R reporting the earnings. The IRS found that the missed deadline resulted from the bank miscommunication, waived the 60-day rollover requirement, and granted 60 days to transfer no more than the distributed amount into a rollover IRA.

Ruling snapshot

• Question: Could an IRA owner receive a rollover waiver when a bank placed intended rollover funds into a non-IRA certificate of deposit?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
201547008
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 27 2015

Uniform Issue List: 408.03-00

Legend:
Taxpayer A =

IRA B =

Bank C =

Bank D =

Account E =
Bank F =
Amount 1 =

Dear :

This is in response to your request for a private letter ruling dated
February 17, 2015, as supplemented by correspondence dated July 9, 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 he received a distribution equal to Amount 1
from IRA B, which was maintained by Bank D. 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 Bank F which led to Amount 1

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201547008

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 Bank C. The funds were invested in an
IRA certificate of deposit (CD). On February 18, 2011, Bank C failed and was
taken over by Bank D, under the supervision of the Federal Deposit Insurance
Corporation. On January 27, 2012, when the CD matured, Taxpayer A closed
IRA B with the intention to invest Amount 1 in another IRA CD with Bank F.
Taxpayer A went to Bank F on January 30, 2012 to complete a rollover but
instead Amount 1 was placed in Account E, a non-IRA CD account. Taxpayer A
was unaware Account E was a non-IRA CD until he received a Form 1099-R

from Bank F in 2013 on the earnings.

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).

201547008

Section 408(d)(3)(D) of the Code provides a similar 60-day rollover period
for partial rollovers.

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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), 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 of
Amount 1 was due to a miscommunication with Bank F which led to Amount 1
being placed in a non-IRA CD 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 1 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.

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201547008

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 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 (I.D. # ), , at

or( )

Sincerely yours,

Carlton A. Watkins

Manager
Employee Plans Technical Group 1

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

cc: