Non-IRA certificate deposit corrected through rollover waiver

Plain-English summary

An IRA owner received a distribution when an IRA certificate of deposit matured and took the check to another financial institution to open a new IRA certificate. Because of a misunderstanding, the institution placed the funds in a non-IRA certificate of deposit instead. The taxpayer believed the new account was an IRA and did not use the money for another purpose. The IRS found that the financial institution misunderstanding caused the missed deadline. It waived the 60-day rollover requirement and gave the taxpayer 60 days to contribute the amount to a rollover IRA.

Ruling snapshot

• Question: Should the taxpayer receive a rollover waiver after a financial institution placed an IRA distribution in a non-IRA certificate of deposit?
• Outcome: Approved, with 60 days to complete the rollover
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224                                      201626029

MAR 28 2016

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T3

Legend:
Taxpayer A =
IRA X =

Bank 1 =

Financial Institution P =

Amount 1 =
Dear

This is in response to your request dated April 5, 2015, submitted on your
behalf by 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 ("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 of Amount 1 from
Individual Retirement Account (IRA) X maintained by Bank 1. Taxpayer A
asserts that her failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3) was due to a misunderstanding with a
representative of Financial Institution P which led to Amount 1 being placed
into a non-IRA account. Taxpayer A further represents that Amount 1 has not

been used for any other purpose.


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Taxpayer A represents that IRA X was invested in a certificate of deposit (CD)
with Bank 1 that matured on February 11, 2014. On the same date, Taxpayer
A received a distribution check for Amount 1 from IRA X and took the check to
Financial Institution P to deposit the check into a new IRA CD at Financial
Institution P. However, due to a misunderstanding, Financial Institution P
deposited the check into a non-IRA CD account. Taxpayer A represents that
she thought Amount 1 had been invested in another IRA with Financial
Institution P .

Based on the facts and representations, you request a ruling that the Internal
Revenue Service (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.

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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) 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
was due to a misunderstanding with a representative of Financial Institution
P which led to Amount 1 being mistakenly placed into a non-IRA account.

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 X. Taxpayer A is granted a period of 60
days from the issuance of this ruling letter to contribute 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, Amount 1 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.

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A copy of this letter has been sent to your authorized representative in
accordance with a power of attorney on file in this office.

If you wish to inquire about this ruling, please contact
(I.D. Number          ) at          . Please address all
correspondence to SE:T:EP:RA:T3.

Sincerely yours,

[signature]

Carlton A. Watkins, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose

CC: