Taxpayer receives a waiver for a late IRA rollover

Plain-English summary

A taxpayer's IRA custodian liquidated her account after unpaid fees, but she did not receive a check and was unaware that a distribution had occurred. She later learned of the distribution from a Form 1099-R and had not used the funds for another purpose. The IRS found that the missed 60-day rollover deadline resulted from a miscommunication with the investment manager and the taxpayer's lack of awareness of the distribution. It waived the deadline and gave her 60 days from the ruling date to complete a rollover to another IRA.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day deadline for rolling an unexpected IRA distribution into another IRA?
• Outcome: Approved, with 60 days from the ruling date to complete the rollover.
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

                                   DEPARTMENT OF THE TREASURY
                                      INTERNAL REVENUE SERVICE
                                         WASHINGTON, D.C. 20224
                                                                        201610024
   COMMISSIONER
                                              DEC 07 2015
                                                      ;

  TAX EXEMPT AND
GOVERNMENT ENTITIES
     DIVISION




         Uniform Issue List: 408.03-00




         Legend


         Taxpayer A                  =

         IRAB                        =



         FundC                       =


         Company D                   =

         Financial Institution E     =

         Financial Institution F     =

         Amount 1                    =




         Dear

         This is in response to your request dated April 23, 2014, as supplemented by
         correspondence dated November 5, 2014, June 1, 2015, and November 19,
         2015, 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").
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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 equal to Amount 1 from
IRA B, an individual retirement account under section 408(a) of the Code, which
was maintained by Financial Institution E. Taxpayer A asserts that her failure to
accomplish a rollover of Amount 1 within the 60-day period prescribed by
408(d)(3)(A) was due to a miscommunication with Company D and the fact that
she was unaware the distribution had occurred.

In 2008, Taxpayer A consulted with an official at Company D about the possibility
of establishing a rollover IRA that would invest in Fund C. After Company D
obtained an IRA custodian for Taxpayer A's investment, Taxpayer A rolled over
cash distributed from her IRA to IRA B, which was maintained by Financial
Institution E. The cash was used to invest in Fund C in an amount equal to
Amount 1. Taxpayer A paid Company D an annual fee to manage her
investment, and Company D advised Taxpayer A regarding any payment of fees
to Financial Institution E.

On November 29, 2012, Taxpayer A received a bill from Financial Institution E for
the current fee and fees that were past due. However, Taxpayer A did not pay
these fees as she believed that, given the fees paid to Company D and her prior
experience with Company D, Company D was handling all aspects of her
investment in Fund C. Subsequently, Taxpayer A received a distribution from
Financial Institution E, which liquidated IRA B by distributing Amount 1.
Taxpayer A was confused, however, because she did not receive a check from
Financial Institution E.

In 2014, Taxpayer A received a Form 1099-R that reported the distribution as
taxable. Taxpayer A represents that she has not used Amount 1 for any other
purpose. Taxpayer A provided correspondence from an IRA custodian, Financial
Institution F, that it will hold Amount 1 in 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
Amount 1 from IRA B and that she 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.
                                                                   201610024
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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).

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.
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                                                                     201610024

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 a miscommunication with
Company D and the fact that she was unaware the distribution had occurred.

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

                                  Sincerely yours,

                                  ~A.uJ~
                                  Carlton A. Watkins, Manager
                                  Employee Plans Technical Group 1


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

cc: