Confusing account names support IRA rollover waiver

Plain-English summary

An elderly taxpayer held an IRA and a non-IRA account at the same financial company, both bearing the same “Retirement Balanced Account” title. Believing the accounts were duplicate IRAs, she withdrew the IRA funds and deposited them into the non-IRA account to simplify her statements. She discovered the mistake only after receiving Form 1099-R and represented that she had taken the required minimum distribution and had not otherwise used the funds. The IRS found that the confusing statements caused the misunderstanding and waived the 60-day deadline. It gave her 60 days to roll over the distribution, reduced by required minimum distributions, into an IRA.

Ruling snapshot

• Question: Should the taxpayer receive a rollover waiver after identically titled IRA and non-IRA accounts caused her to move funds into the wrong account?
• Outcome: Approved, with 60 days to complete the rollover net of required distributions
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201625023

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

MAR 23 2016

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend
Taxpayer A =

IRA B =
Account C =

Company D =

Amount 1 =

Dear                  :

This is in response to your request dated September 29, 2015, as supplemented
by correspondence March 15, 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 she received a distribution equal to Amount 1 from IRA
B, which was maintained by Company D. Taxpayer A asserts that her failure to
accomplish a rollover within the 60-day period prescribed by 408(d)(3)(A) of the
Code was due to a misunderstanding based on a confusing financial statement.

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Taxpayer A owned IRA B, which was entitled the “Company D Retirement
Balanced Account.” Taxpayer A maintained other accounts with Company D, one
of which was a non-IRA account, Account C. Similar to IRA B, Account C was
also entitled the “Company D Retirement Balanced Account.” To simplify her
financial statements, Taxpayer A, who is elderly, wished to consolidate IRA B with
Account C, which she believed to be duplicate IRA accounts.

On May 23, 20, Taxpayer A withdrew Amount 1 from IRA B and deposited the
net proceeds into non-IRA Account C. Taxpayer A discovered that Account C was
not an IRA account when she received the Form 1099-R for the 20  year,
Taxpayer A represents that she received the required minimum distribution for the
20 -calendar year. Taxpayer A also represents that Amount 2 has not been used
for any other purpose.

Based on the above facts and representations, you request a ruling that the
Service waive the 60-day rollover requirement under section 408(d)(3) of the Code
as to the distribution of Amount 1 less minimum required distributions.

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
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)).

3

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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 a misunderstanding based on
confusing financial statements from Company D.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the 60-
day rollover requirement with respect to the distribution equal to Amount 1.
Taxpayer A has 60 days from the issuance of this letter ruling to complete the
rollover of an amount not exceeding Amount 1, less minimum required
distributions, into 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 net of

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required minimums, 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, Manager
Employee Plans Technical Group 1

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

cc: