IRA rollover deadline waived after custodian’s notice went to an old address

Plain-English summary

An IRA custodian resigned and distributed the account after custodial fees went unpaid. The custodian mailed its resignation notice to the taxpayer’s former address, and the notice was not forwarded after the taxpayer moved to another state. The taxpayer did not learn of the distribution until receiving a notice of deficiency, had not used the distributed amount, and found a new custodian willing to accept it. The IRS concluded that the missed rollover deadline resulted from circumstances beyond the taxpayer’s reasonable control. It waived the 60-day deadline and gave the taxpayer 60 days from the ruling date to complete the rollover.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover deadline when the custodian’s resignation notice went to an old address?
• Outcome: Approved.
• Key authorities: IRC §§ 72, 408(a), 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201620020
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 17 2016

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend

Taxpayer A =
IRA B =
Fund C =
Trust Company D =
Financial Institution E =
Company F =
Company G =
Company H =
Individual I =
Individual J =
State X =
State Y =
Amount 1 =

2 201620020

Dear :

This is in response to your request dated August 4, 2015, as supplemented by
correspondence dated November 19, 2015, and January 13, 2016, in which you
request, through your authorized representative, 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, an individual retirement account under section 408(a) of the Code, which
was maintained by Trust Company D. Taxpayer A asserts that his failure to
accomplish a rollover of Amount 1 within the 60-day period prescribed by section
408(d)(3)(A) was due to the fact that he was unaware of the distribution of
Amount 1 from IRA B because Trust Company D’s resignation letter was not
forwarded to Taxpayer A’s new address.

In November of 2003, Individual I, Taxpayer A’s broker, advised Taxpayer A to
invest his IRA in Fund C, which was maintained by Financial Institution E. In
March of 2007, Taxpayer A changed custodians for IRA B to Trust Company D.
Over the years, Taxpayer A continued to rely on the services of Individual I, who
oversaw Taxpayer A’s IRA investments.

In 2010, Taxpayer A and Individual I agreed that in order to compensate
Taxpayer A for losses sustained in IRA B, Individual I and his firm, Company G,
would be responsible for the payment of custodial fees to Trust Company D. In
September of 2011, Individual I transferred employment to a new brokerage firm,
Company F, where he continued to serve as Taxpayer A’s broker until Individual
I took an indefinite leave of absence and Taxpayer A’s accounts were assigned
to Individual J.

On December 5, 2012, Trust Company D sent a letter to Taxpayer A’s former
address, advising him that it was resigning as custodian of IRA B — which
resignation would become effective on February 1, 2013, due to non-payment of
fees. However, Taxpayer A had moved from State X to State Y and the letter
was not forwarded to Taxpayer A’s new address. Consequently, Taxpayer A
was unaware that Amount 1 was distributed from IRA B until he received a
Notice of Deficiency for the tax year.

Taxpayer A represents that Amount 1 has not been used for any other purpose.
Taxpayer A has found a new IRA custodian, Company H, which is willing to
accept a rollover of Amount 1 into an IRA.

Based on the above facts and representations, Taxpayer A requests that the
Service waive the 60-day rollover requirement with respect to the distribution of

3 201620020

Amount 1 from IRA B and that he be given 60 days from the date of a favorable
letter ruling to roll over the distribution of Amount 1 into another IRA.

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.

Section 408(d)(3) of the Code provides the rules applicable to IRA rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) 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 or 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 of the Treasury may
waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D)
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).

4 201620020

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) of the Code, 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 Service has the authority to waive the 60-day rollover requirement where the
individual failed to complete a rollover to another IRA within the 60-day rollover
period because of one of the factors enumerated in Rev. Proc. 2003-16; for
example, errors committed by a financial institution, death, hospitalization, postal
error, incarceration, and/or disability.

The information and documentation submitted are consistent with Taxpayer A’s
assertion that the failure to accomplish a rollover within the 60-day period
prescribed by 408(d)(3)(A) of the Code was due to the fact that he was unaware
of the distribution of Amount 1 from IRA B because Trust Company D’s
resignation letter was not forwarded to Taxpayer A’s new address.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the
60-day rollover requirement with respect to the distribution of Amount 1, and
Taxpayer A has 60 days from the issuance of this letter ruling to complete the
rollover of Amount 1 to an IRA.

Provided all other requirements of section 408(d)(3) of the Code, except the 60-
day requirement, will be met with respect to the contribution of Amount 1, such
contribution will be considered a rollover contribution within the meaning of
section 408(d)(3).

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.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling
is being sent to your authorized representative.

5 201620020

If you wish to inquire about this ruling, please contact
at . Please address all correspondence to SE:T:EP:RA:T1.

Sincerely yours,

[signature]

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

cc: