IRS waives the 60-day deadline for two IRA rollovers placed in non-IRA accounts

Plain-English summary

A married couple took distributions from separate IRAs intending to roll the funds into new IRAs that would invest in real estate partnerships. They relied on a financial adviser and financial institution, but the funds were placed in non-IRA accounts. The couple did not discover the error until after the 60-day rollover periods had expired. The IRS found the submitted information consistent with errors by the adviser and institution and waived the deadline for both distributions. Each spouse received 60 days from the ruling to contribute cash up to the amount of that spouse's distribution to an IRA, subject to the other rollover requirements and limits.

Ruling snapshot

• Question: Could the 60-day IRA rollover deadline be waived for two spouses whose distributions were mistakenly invested in non-IRA accounts?
• Outcome: approved (each spouse received 60 days to contribute up to that spouse's distribution to an IRA)
• Key authorities: IRC §§ 72, 401(a)(9), 408(a), 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

202032009

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities

IRS Employee Plans

May 13, 2020

Uniform Issue List: 408.03-00

Legend

Taxpayer A =
Taxpayer B =

IRA C =
IRA D =
IRA E =

IRA F =

Financial Institution G =

Financial Advisor H =

Financial Institution I =

Amount 1 =

Amount 2 =
Date 1 =

Date 2 =

Dear:

This is in response to your request dated October 31, 2019, as supplemented by
letters dated March 18, 2020, and March 20, 2020, in which you request, through
your authorized representative, waivers of the 60-day rollover requirement
contained in section 408(d)(3) of the Internal Revenue Code (the “Code”).

You submitted, under penalties of perjury, the following facts and representations
in support of your ruling request.

Taxpayer A represents that on Date 2, he received a distribution equal to Amount
1 from IRA C. Taxpayer A asserts that he was unable to accomplish a rollover of
Amount 1 within the 60-day period prescribed by section 408(d)(3) of the Code
because of errors made by Financial Advisor H and Financial Institution I, which
led to the investment of Amount 1 in a non-IRA account.

Taxpayer B, Taxpayer A’s spouse, represents that on Date 2, she received a
distribution equal to Amount 2 from IRA D. Taxpayer B asserts that she was
unable to accomplish a rollover of Amount 2 within the 60-day period prescribed
by section 408(d)(3) of the Code because of errors made by Financial Advisor H
and Financial Institution I, which led to the investment of Amount 2 in a non-IRA
account.

On Date 1, Taxpayer A and Taxpayer B worked with Financial Advisor H of
Financial Institution G in rolling over distributions from their 401(k) plan accounts
into IRA C and IRA D. Subsequently, Taxpayer A and Taxpayer B wanted to roll
over funds from IRAs C and D to IRAs E and F, respectively. IRA E and IRA F
were maintained by Financial Institution I. Taxpayers A and B intended to roll over
Amounts 1 and 2 into their IRAs with Financial Institution I which would invest
Amounts 1 and 2 in real estate partnerships. Having worked with Financial Advisor
H and Financial Institution I in the past, Taxpayers A and B relied on their advice
to effectuate rollovers from IRA C to IRA E and from IRA D to IRA F. On Date 2,
Taxpayer A took a distribution equal to Amount 1 from IRA C for purposes of
rolling it over into IRA E. On this same date, Taxpayer B took a distribution equal
to Amount 2 from IRA D for purposes of rolling it over into IRA F. Due to errors on

the part of Financial Advisor H and Financial Institution I, however, Amount 1 and
Amount 2 were invested in non-IRA accounts. Taxpayer A and Taxpayer B
received Forms 1099-R showing taxable distributions from IRA C and IRA D,
which they believed were issued in error. Taxpayer A and Taxpayer B became
aware that Amount 1 and Amount 2 were not held in IRA accounts after the
expiration of the 60-day period.

Based on the above facts and representations, Taxpayer A and Taxpayer B
request the following rulings:

(1) Taxpayer A requests 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 on Date 2 from IRA C.

(2) Taxpayer B requests 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 2 on Date 2 from IRA D.

Section 408(a) of the Code defines an individual retirement account 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)).

Section 408(d)(3)(B) of the Code provides that the rollover provisions of section
408(d)(3)(A)(i) do not apply to any amount 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 from an IRA that was not includible in gross
income because of the application of the rollover provisions in section 408(d)(3)
(“one-year limitation”).

Section 408(d)(3)(E) of the Code provides that the rollover provisions of section
408(d)(3) 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.

Section 3.02 of Revenue Procedure 2003-16, 2003-4 I.R.B. 359 (“Rev. Proc.
2003-16”), 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.

Section 3.04 of Rev. Proc. 2003-16 provides that the rules regarding the amount of
money or other property that can be rolled over into an eligible retirement plan
within the 60-day rollover period apply to deposits made pursuant to a waiver of
the 60-day rollover period (thus, if a taxpayer received $6,000 in cash from the
taxpayer's IRA, the most that could be deposited into an eligible retirement plan
pursuant to a waiver of the 60-day rollover period is $6,000).

The information and documentation submitted are consistent with Taxpayer A’s
assertion that he was unable to accomplish a rollover of Amount 1 within the 60-
day period prescribed by section 408(d)(3) because of errors made by Financial
Advisor H and Financial Institution I, which led to the investment of Amount 1 in a
non-IRA account.

The information and documentation submitted are consistent with Taxpayer B’s
assertion that she was unable to accomplish a rollover of Amount 2 within the 60-
day period prescribed by section 408(d)(3) because of errors made by Financial
Advisor H and Financial Institution I, which led to the investment of Amount 2 in a
non-IRA account.

Therefore, pursuant to section 408(d)(3)(I) of the Code, with respect to ruling
request (1), the Service waives the 60-day rollover requirement with respect to the
distribution of Amount 1 from IRA C on Date 2. Taxpayer A has 60 days from the
issuance of this letter ruling to contribute cash in an amount not in excess of
Amount 1 into an IRA. Provided all other requirements of section 408(d)(3),
except the 60-day requirement, will be met with respect to the contribution, such
contribution will be considered a rollover contribution within the meaning of section
408(d)(3).

Regarding ruling request (2), the Service waives the 60-day rollover requirement
with respect to the distribution of Amount 2 from IRA D on Date 2. Taxpayer B has
60 days from the issuance of this letter ruling to contribute cash in an amount not
in excess of Amount 2 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, 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 401(a)(9) of the Code or to amounts that are subject to the
one-year limitation under section 408(d)(3)(B).

No opinion is expressed as to the tax treatment of the transactions 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 taxpayers 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, copies of this letter ruling
are being sent to your authorized representatives.

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

Sincerely,

Adam P. Zaebst, Manager
Employee Plans Technical Group 1

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

cc: