IRA rollover deadline waived after the custodian surrendered the wrong account

Plain-English summary

A taxpayer instructed a financial institution to surrender a nonqualified annuity, but the institution mistakenly surrendered the taxpayer’s IRA instead. The resulting IRA distribution was not rolled over within 60 days. The institution admitted its administrative error, and the taxpayer supplied documentation supporting the request. The IRS concluded that the missed deadline resulted from an event beyond the taxpayer’s reasonable control and waived the 60-day requirement. The taxpayer received 60 days from the ruling date to contribute up to the distributed amount to a rollover IRA, subject to the other rollover rules.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover deadline after the financial institution distributed the wrong account?
• Outcome: Approved.
• Key authorities: IRC §§ 72, 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
201621022

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

COMMISSIONER
TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

FEB 25 2016

Uniform Issue List: 408.03-00

SE:T:EP:RA:T2

Legend:
Taxpayer A =
IRA X =

Amount B =

Financial Institution C =

Company D =

Dear

This is in response to your letter, dated April 12, 2014, supplemented by your correspondence dated June 10, 2015, and October 16, 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 she received a distribution from IRA X totaling Amount B. Taxpayer A asserts that her failure to complete a rollover of Amount B within the 60-day period prescribed by section 408(d)(3) of the Code, was due to an error by Financial Institution C.

On August 19, 2013, Taxpayer A contacted Financial Institution C to execute a withdrawal request and complete a cash surrender of her nonqualified annuity contract held with Company D. However, due to an inadvertent administrative error, a representative of Financial Institution C processed a withdrawal request and completed

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a cash surrender of IRA X. Taxpayer A submitted a letter she received from Financial Institution C admitting the error which caused the distribution of Amount B from IRA X.

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 B.

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

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casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement.

Rev. Proc. 2003-16, 2003-4 I.R.S. 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 information presented and documentation submitted by Taxpayer A is consistent with her assertion that her failure to accomplish a timely rollover of Amount B was due to an error 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 B from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute an amount not to exceed Amount B 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.

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 Please address all correspondence to.

SE:T:EP:RA:T3.

Sincerely yours,

[illegible signature]

Carolyn E. Zimmerman, Acting Manager
Employee Plans Technical Group 3