IRA owner receives waiver for rollover delayed by bank error

Plain-English summary

An IRA owner intended to reinvest a certificate of deposit within his IRA, but a bank representative completed a distribution election without his signature or consent. The representative told him the funds would remain on hold until another bank employee reinvested them, but the rollover was not completed and the representative later resigned. The IRS found the missed 60-day deadline resulted from the financial institution’s error and waived the deadline under IRC § 408(d)(3)(I). The taxpayer received 60 days from the ruling’s issuance to contribute the distribution to a rollover IRA, provided all other rollover requirements were met. The ruling did not permit rollover of any required minimum distribution.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover deadline after a bank representative mishandled the distribution?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3) and 408(a)(6); Rev. Proc. 2003-16

Full text (IRS public release)

201619015

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

FEB 10 2016

T:EP:RA:T2

U.I.L. 408.03-00

XXXXXXXXXXXXXX

XXXXXXXXXXXXXX

XXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXX
IRA X = XXXXXXXXXXX
Bank D = XXXXXXXXXXX
Amount E = XXXXXXXXXXX
Individual M = XXXXXXXXXXX
Dear XXXXXXXXXX:

This letter is in response to your request dated December 19, 2014, as
supplemented by correspondence dated October 7, 2015, and October 26, 2015,
in which you request 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 July 22, 2013, he received a distribution totaling
Amount E from IRA X. Taxpayer A asserts that his failure to accomplish a
rollover of Amount E within the 60-day period prescribed by section 408(d)(3) of
the Code was due to an error committed by Individual M of Bank D.

Taxpayer A had IRA X with Bank D. Taxpayer A represents that in 2013, he
visited with Individual M of Bank D and discussed rolling over his certificate of
deposit (CD) in IRA X and reinvesting it in another CD. Since Individual M was
not licensed to reinvest the CD in IRA X, Individual M referred Taxpayer A to
another representative of Bank D who was not available at that time to speak to
Taxpayer A.

Taxpayer A further represents that on July 22, 2013, Individual M completed a
distribution election form to distribute Amount E from IRA X without the signature
or consent of Taxpayer A. The election form provided that Amount E be
deposited into Individual M’s savings account with Bank D. After Taxpayer A
became aware of the distribution from IRA X, he asked Individual M whether he
would be taxed on the distribution of Amount E. Individual M told him that
Amount E would be on “hold” until it was re-invested in another CD by another
representative of Bank D.

Taxpayer A never heard further from Individual M or any other representative of
Bank D. After the 60-day rollover period had expired, Taxpayer A contacted Bank
D and became aware that Amount E had not been rolled over and Individual M
had resigned from Bank D. Amount E has not been used for any other purpose
and remains in Taxpayer A’s savings account with Bank D.

Based on the foregoing facts and representations, you request that the Internal
Revenue Service (Service) waive the 60-day rollover requirement contained in
section 408(d)(3) of the Code with respect to Amount E.

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 received 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 included 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, 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 is
consistent with his assertion that his failure to accomplish a timely rollover was
due to an error committed by Individual M, a representative of Bank D.


201619015

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
E from IRA X. Taxpayer A is granted a period of 60 days from the issuance of
this letter to contribute Amount E into a rollover IRA. Provided all other
requirements of Code section 408(d)(3), except the 60-day requirement, are met
with respect to such contribution, the contribution of Amount E 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.

If you have any questions concerning this ruling, please contact xxxxxxxxxxxxx
xxxxxxxxxxxx, at xxxxxxxxxxxxxx. All correspondence should be addressed to
SE:T:EP:RA:T3.

Sincerely yours,

Carolyn E. Zimmerman, Acting Manager
Employee Plans Technical Group 3

Enclosures:

Deleted copy of letter ruling
Notice of Intention to Disclose