IRS waives the 60-day deadline for two IRA rollovers mishandled by advisers

Plain-English summary

A married couple relied on a financial adviser and two institutions to place IRA distributions into self-directed IRAs that would invest in a real estate partnership. Instead, a distribution taken by one spouse before her death and a later distribution taken by the surviving spouse were placed in non-IRA accounts. The surviving spouse learned of the problem only after receiving Forms 1099-R and after the 60-day rollover periods had expired. The IRS found the documentation consistent with errors by the adviser and institutions and waived the deadline for both distributions. It gave the surviving spouse 60 days to contribute cash no greater than the combined distributions to an IRA, while stating that the ruling did not authorize rollover of any required minimum distribution.

Ruling snapshot

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

Full text (IRS public release)

202032010

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 =
Decedent B =

IRA C =

IRA D =

Financial Institution E =

Financial Advisor F

Financial Institution G =
Amount 1 =
Amount 2 =
Amount 3 =

Date 1 =

Date 2 =
Date 3 =

Date 4 =

Dear:

This is in response to your request dated October 31, 2019, as supplemented by a
letter dated March 20, 2020, submitted on your behalf by your authorized
representative, in which you request 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, Decedent B, prior to her death, received a
distribution equal to Amount 1 from IRA C, a traditional IRA under section 408(a)
of the Code. Taxpayer A asserts that Decedent B was unable to accomplish the
rollover of Amount 1 within the 60-day period prescribed by section 408(d)(3)
because of errors made by Financial Advisor F with Financial Institution E and
Financial Institution G, which led to the investment of Amount 1 in a non-IRA
account.

Taxpayer A also represents that on Date 4, Taxpayer A received a distribution
equal to Amount 2 from IRA D. Taxpayer A asserts that he was unable to
accomplish the rollover of Amount 2 within the 60-day period prescribed by section
408(d)(3) because of errors made by Financial Advisor F with Financial Institution
E and Financial Institution G, which led to the investment of Amount 2 in a non-
IRA account.

Financial Institution E maintained IRA C and IRA D. Taxpayer A was married to
Decedent B and was the sole designated beneficiary of IRA C. After Decedent B’s
death, Taxpayer A assumed ownership of IRA C with the establishment of IRA D.

On Date 1, prior to her death, Decedent B worked with Financial Advisor F and
Financial Institution G in rolling over a distribution from her 401(k) plan to IRA C.
Subsequently, Decedent B wanted to roll over Amount 1 from IRA C into a self-
directed IRA maintained by Financial Institution G that would invest in a real estate
partnership. Working with Financial Institution G and relying on the advice of
Financial Advisor F, on Date 2 Decedent B took a distribution from IRA C equal to
Amount 1 for purposes of rolling it over to an IRA with Financial Institution G.
Based on the assurances of Financial Advisor F, Decedent B and Taxpayer A

believed that Amount 1 had been rolled over into an IRA with Financial Institution
G. However, Amount 1 was invested in a non-IRA account. On Date 3, Decedent

B died.

On Date 4, Taxpayer A again relied on the advice of Financial Advisor F with
Financial Institution E and Financial Institution G when he took a distribution equal
to Amount 2 from IRA D to roll over into a self-directed IRA with Financial
Institution G. Amount 2, however, was invested in a non-IRA account.

Taxpayer A received Forms 1099-R showing taxable distributions from IRA C and
IRA D, which he believed were issued in error based on the assurances of
Financial Advisor F. Taxpayer A became aware that Amount 1 and Amount 2
were not held in IRA accounts after the expiration of the 60-day period. Amount 1
and Amount 2 total Amount 3.

Based on the above facts and representations, Taxpayer A requests that the
Service waive the 60-day rollover requirement under section 408(d)(3) of the Code
with respect to the distribution of Amount 1 from IRA C on Date 2 and the
distribution of Amount 2 from IRA D on Date 4.

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)(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 Decedent B and Taxpayer A were unable to accomplish rollovers of
the distributions of Amount 1 from IRA C and Amount 2 from IRA D within the 60-
day period prescribed by section 408(d)(3) because of errors made by Financial
Advisor F with Financial Institution E and Financial Institution G, which led to the
investment of Amount 1 and Amount 2 in non-IRA accounts.

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 from IRA C on
Date 2 and Amount 2 from IRA D on Date 4. Taxpayer A has 60 days from the
issuance of this ruling to contribute cash in an amount not to exceed Amount 3,
the total of Amount 1 and Amount 2, to an IRA account. Provided all other
requirements of section 408(d)(3) of the Code, except the 60-day requirement, will
be met with respect to such contribution, the 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.

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: