IRS waives rollover deadline after IRA was sent to the state

Plain-English summary

A retired taxpayer owned an IRA certificate of deposit that she expected to renew automatically after receiving her required minimum distribution. Instead, the financial institution sent the remaining IRA funds, less withholding, to a state as unclaimed property. The taxpayer learned of the distribution from an account statement and Form 1099-R, then received the funds plus interest from the state and rolled them into another IRA. She represented that she had not used the money for another purpose. The IRS found the missed deadline resulted from financial-institution error and waived the 60-day rollover requirement, subject to all other rollover rules.

Ruling snapshot

• Question: Could the taxpayer receive a waiver after her financial institution transferred IRA funds to a state as unclaimed property?
• Outcome: Approved, subject to all other rollover requirements.
• 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

JUN 01 2016

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

201635012

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend
Taxpayer A =

IRA B =
IRA C =

Amount 1 =
Amount 2 =
Amount 3 =
Financial Institution D =
Financial Institution E =

State M =

Dear

This is in response to your request dated January 12, 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.

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Taxpayer A represents that she received a distribution equal to Amount 1 from IRA
B, which was maintained by Financial Institution D. Taxpayer A asserts that her
failure to accomplish a rollover within the 60-day period prescribed by section
408(d)(3)(A) of the Code was due to financial institution error.

Taxpayer A was the owner of IRA B, which was maintained by Financial Institution
D. Taxpayer A is retired and on September 16, 2014, she received her required
minimum distribution from IRA B. On October 3, 2014, Taxpayer A received
notice that her IRA CD would mature and absent any action on her part, it would
automatically renew at the interest rate on October 20, 2014.

On January 17, 2015, Taxpayer A received a July 1, 2014, through December 31,
2014, financial statement that showed that on October 30, 2014, Financial
Institution D distributed Amount 2 (Amount 1 less withholding), to State M as
“Unclaimed Property.” On January 30, 2015, Taxpayer A received a Form 1099-R
stating that Amount 1 had been distributed from IRA B. On February 26, 2015,
State M issued Taxpayer A the “Unclaimed Property” in the form of a check equal
to Amount 3 (Amount 2 plus interest). On March 9, 2015, Taxpayer A rolled over
Amount 3 to IRA C with Financial Institution E.

Taxpayer A represents that Amount 3 has not been used for any other purpose.

Based on the above facts and representations, Taxpayer A requests a waiver of
the 60-day rollover requirement with respect to the distribution of Amount 3 from
IRA B.

Section 408(a) of the Code defines an IRA to mean a trust created or organized in
the United States, and requires that the trustee be a bank or an approved non-
bank trustee.

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


3 201635012

(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.

Rev. Proc. 2003-16, 2003-4 I.R.B. 359, provides that the Service will issue a ruling
waiving the 60-day rollover requirement in cases 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 taxpayer. 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 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 financial institution error.

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 3 from IRA B.

4 201635012

Provided all other requirements of section 408(d)(3), except the 60-day
requirement, were met with respect to the contribution of Amount 3 to IRA C, 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.

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

Sincerely yours,

Carlton A. Watkins

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

Cc: