Brokerage withdrawal error receives IRA rollover waiver

Plain-English summary

A taxpayer requested a distribution from his ordinary brokerage account, but the financial institution mistakenly distributed the same amount from his IRA. The institution acknowledged its mistake and later deposited the amount back into the IRA. The taxpayer represented that the funds had not been used for another purpose. The IRS waived the 60-day rollover deadline and treated the institution's redeposit as a valid rollover contribution, assuming the other rollover requirements were met.

Ruling snapshot

• Question: Would the IRS waive the 60-day deadline when a financial institution mistakenly distributed funds from an IRA instead of a brokerage account?
• Outcome: Approved, the later redeposit was treated as a rollover contribution.
• Key authorities: IRC §§ 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 18 2015

Uniform Issue List: 408.03-00

Legend:

Taxpayer A =

IRA B =

Financial Institution C =

Account D =

Amount 1 =

Dear                 :

This is in response to your request for a private letter ruling dated July 17,
2015, as supplemented by correspondence dated September 25, 2015, from
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 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 a mistake by Financial
Institution C. Taxpayer A further represents that Amount 1 has not been used for
any other purpose.




Taxpayer A maintained IRA B with Financial Institution C. On April 1,
2014, Taxpayer A requested a distribution of Amount 1 from his non-IRA
brokerage account (Account D) with Financial Institution C. For unexplained
reasons, Amount 1 was distributed from Taxpayer A’s IRA (IRA B). The request
for relief is accompanied by a letter from Financial Institution C acknowledging
the mistake. On December 3, 2014, Financial Institution C deposited Amount 1
into IRA B.

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).

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
are consistent with his assertion that his failure to accomplish a timely rollover of
Amount 1 was due a mistake by 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 IRA B. Provided all other requirements of section 408(d)(3) of the
Code, except the 60-day requirement, are met with respect to Taxpayer A’s
contribution of Amount 1 into IRA B on December 3, 2014, 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.

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 (          )          .

Sincerely yours,

Manager
Employee Plans Technical Group 1

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

cc: