Adviser error excuses rollover completed two days late

Plain-English summary

A taxpayer preparing for retirement followed a financial institution vice president's advice to withdraw assets from an IRA and use the 60-day rollover period. Mistakes by the adviser prevented the taxpayer from returning the money to an IRA before the deadline. The taxpayer deposited the full amount into a new IRA two days late and documented the adviser's error in an official capacity. He also represented that the money had not been used for any other purpose. The IRS treated the delay as financial institution error and waived the 60-day requirement.

Ruling snapshot

• Question: Could the taxpayer receive a waiver when an adviser's mistakes caused an IRA rollover to be completed two days late?
• Outcome: approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

AUG 08 2016

201645021

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend
Taxpayer A =

IRA B =

Financial Institution C =

Financial Institution D =

Financial Institution E =

Individual F =
IRA G =
Amount 1 =

Dear

This is in response to your request dated May 9, 2016, as supplemented by
correspondence received on July 26, 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 on June 9, 2015, he received a distribution equal to
Amount 1 from IRA B, an individual retirement arrangement (“IRA”) described in

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section 408(a) of the Code. Taxpayer A asserts that his failure to accomplish a
rollover within the 60-day period prescribed by section 408(d)(3)(A) was due to
financial institution error.

Taxpayer A had been a client of Financial Institution C and Individual F, the Vice
President of Financial Institution D, for over 10 years. Financial Institution D is
affiliated with Financial Institution C. Taxpayer A owned IRA B which was
maintained by Financial Institution E. Financial Institution E provides custodial
services on behalf of Financial Institution C’s clients.

Taxpayer A was preparing for retirement and was advised by Individual F to utilize
the 60-day rollover period for IRAs and withdraw the assets of IRA B. Taxpayer A
followed Individual F’s advice and on June 9, 2015, he received a distribution from
IRA B. However, due to mistakes made by Individual F, Taxpayer A was unable to
contribute Amount 1 back into an IRA within the 60-day rollover period. On August
11, 2015, two days after the expiration of the 60-day rollover period, Taxpayer A
contributed Amount 1 to IRA G, which was also maintained by Financial Institution
D. Taxpayer A submitted documentation evidencing the error made by Individual
F in his official capacity as the Vice President of Financial Institution D. Taxpayer
A represents that Amount 1 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 1 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

(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

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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 section 408(d)(3)(A) 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 1. Provided all

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

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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, Manager
Employee Plans Technical Group 1

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

cc: