Incorrect 90-day advice supports an IRA rollover waiver

Plain-English summary

A taxpayer transferred money from a SEP-IRA to a savings account while considering an office purchase. A financial institution employee told him that he could redeposit the money within 90 days, but the actual rollover deadline was 60 days. He tried to return the funds five days before the stated 90-day period expired and then learned that the statutory deadline had passed. The funds remained in the savings account throughout the period. The IRS found that the missed deadline resulted from the institution's incorrect advice and granted 60 days to roll over up to the distributed amount.

Ruling snapshot

• Question: May a taxpayer complete a SEP-IRA rollover after relying on a financial institution's incorrect statement that the deadline was 90 days?
• Outcome: Approved, with 60 days from the ruling date to complete the rollover
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201603045

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

OCT 20 2015

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

Legend:
Taxpayer A =

SEP-IRA B =

Financial Institution C =

Account D =
Amount 1 =

Dear:

This is in response to your request for a private letter ruling dated April 27, 2015,
as supplemented by correspondence dated June 23, and September 24, 2015, 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 SEP-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 incorrect advice provided by a
representative of Financial Institution C. Taxpayer A further represents that
Amount 1 has not been used for any other purpose.

Page 2

Taxpayer A maintained SEP-IRA B with Financial Institution C. On December
31, 2014, Taxpayer A directly transferred Amount 1 from SEP-IRA B to his
savings account (Account D) with the same financial institution. He intended to
use Amount 1 to finance the purchase of a new office. He represents that at the
time he applied for this distribution, an employee of Financial Institution C
advised him that SEP-IRA distributions could be redeposited within 90 days.
When the purchase of the new office did not occur, five days before the
expiration of the 90-day period, Taxpayer A attempted to transfer Amount 1 back
into SEP-IRA B. At this time, Taxpayer A was informed the period to complete
the rollover was actually 60 days instead of 90. Taxpayer A was informed by
Financial Institution C that it would provide a letter of culpability. Amount 1
remained in Account D for the entire period.

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).

Page 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), 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 caused by incorrect advice provided by representative of 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 1 from SEP-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 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

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
(I.D. # ), , at ( ) .

Sincerely yours,

Carlton A. Watkins
Manager
Employee Plans Technical Group 1

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose