Mistaken transfer to brokerage account receives rollover waiver

Plain-English summary

An IRA owner instructed a financial representative to keep her retirement accounts in nontaxable IRAs while transferring them to a new institution. One IRA was properly transferred, but another was placed in a regular brokerage account, and the taxpayer did not receive a Form 1099-R or fully understand the error until she tried another transfer nearly three years later. The IRS found that the missed rollover deadline resulted from miscommunication with the receiving financial institution. It waived the deadline under IRC § 408(d)(3)(I) and gave the taxpayer 60 days to contribute up to the distribution amount to a rollover IRA. The ruling did not authorize rollover of a required minimum distribution.

Ruling snapshot

• Question: May the taxpayer receive a waiver after a requested IRA-to-IRA transfer was mistakenly placed in a non-IRA brokerage account?
• Outcome: Approved
• 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

FEB 03 2016

201618015

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 =

Account D =

Financial Institution E =
Financial Institution F =

Amount 1 =

Dear:

This letter is in response to a letter dated August 7, 2015, from 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
penalties of perjury in support of your request.

Taxpayer A represents that she received a distribution from IRA B totaling
Amount 1. Taxpayer A asserts that her failure to accomplish a rollover within the
60-day period prescribed by section 408(d)(3) of the Code was due to a
miscommunication with Financial Institution E. Taxpayer A further represents
that Amount 1 has not been used for any other purpose.

Page 2

Taxpayer A maintained IRA B with. Financial Institution C. In early 2012, a
representative of Financial Institution E conducted a review of Taxpayer A’s
retirement investments which included IRA B. Based on this review, the
representative recommended that Taxpayer A move her IRAs to accounts at
Financial Institution E. Taxpayer A represents she indicated to the
representative that she wanted to maintain the accounts as non-taxable IRAs.
On February 2, 2012, Taxpayer A, with the help of a representative of Financial
Institution E, completed the necessary forms to effectuate a transfer of her IRAs
to Financial Institution E. On March 13, 2012, while one IRA was properly
transferred to an IRA at Financial Institution E, IRA B was transferred to a non-
IRA brokerage account, Account D. Taxpayer A never received a Form 1099R
for the 2012 transfer indicating that Financial Institution C believed it was a
transfer to another IRA at Financial Institution E. Taxpayer A did not fully
understand the failed rollover until early 2015 when she attempted to transfer her
accounts to Financial Institution F.

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

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. Only
distributions that occurred after December 31, 2001, are eligible for the waiver
under section 408(d)(3)(I) of the Code.

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), 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
are consistent with her assertion that her failure to accomplish a timely rollover of
Amount 1 was due to a miscommunication with Financial Institution E.

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 B. Taxpayer A is granted a period of 60 days from the
issuance of this letter ruling to contribute an amount not to exceed 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, 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 401(a)(9) of the Code.

Page 4

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.

A copy of this letter ruling has been sent to your authorized representative
pursuant to a power of attorney on file in this office. If you wish to inquire about
this ruling, please contact , SE:T:EP:RA:T1, at

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

cc: