Wrong-account deposit receives IRA rollover waiver

Plain-English summary

A taxpayer instructed a financial institution to roll funds from one IRA into another IRA at the same institution. The institution instead deposited the funds into a non-IRA account. After the taxpayer discovered the error from a Form 1099-R, the institution moved the amount into the intended IRA and acknowledged its mistake in writing. The IRS waived the 60-day deadline and treated that later contribution as a rollover, provided the other rollover requirements were met.

Ruling snapshot

• Question: Would the IRS waive the 60-day rollover deadline when a financial institution deposited an intended IRA-to-IRA rollover into a non-IRA account?
• Outcome: Approved, the institution's later contribution to the intended IRA was treated as a rollover.
• Key authorities: IRC §§ 72, 401(a)(9), and 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

DEC 16 2015

Uniform Issue List 408.00-00

Legend:

Taxpayer A =

IRA B =

IRA C =

Financial Institution D =

Amount 1 =

Dear                 :

This is in response to your request dated August 24, 2015, and
supplemented by correspondence received October 5, 2015, in which you
requested 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 an error made by
Financial Institution D. Taxpayer A further represents that the amount distributed
has not been used for any other purpose.

Taxpayer A maintained IRA B at Financial Institution D. On February 16,
2012, Taxpayer A instructed Financial Institution D to roll over Amount 1 from
IRA B to another IRA he maintained at Financial Institution D. Contrary to his
instructions, Financial Institution D deposited Amount 1 into a non-IRA account.

Taxpayer A first became aware that Amount 1 was not transferred into an
IRA account when he received form 1099-R for 2012. Taxpayer A alerted
Financial Institution D of the error and on April 26, 2013, Financial Institution D
completed the rollover of Amount 1 into IRA C. Taxpayer A has submitted a letter
in which Financial Institution D acknowledges its error.

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 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).

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.

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 was
caused by an error on the part of Financial Institution D.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service
thereby 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, except the 60-day requirement, are met with respect to the contribution of
Amount 1 into IRA C on April 26, 2013, such 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.

If you wish to inquire about this ruling, please contact ******* at *******.
Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Sherri M. Edelman, Manager,
Employee Plans Technical Group 2

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