60-day IRA rollover deadline waived for a fraud-scheme victim

Plain-English summary

A taxpayer withdrew money from her traditional IRA but did not roll it into another retirement account within the 60 days the law normally requires. She explained that she was the victim of an international fraud scheme: individuals posing as foreign law enforcement threatened her with extradition and imprisonment unless she wired the withdrawn funds abroad as supposed "proof of innocence." By the time she realized the fraud, contacted authorities, and hired an attorney, the 60-day window had passed. Under Section 408(d)(3)(I), the IRS may waive the 60-day deadline when enforcing it would be against equity or good conscience, considering factors listed in Rev. Proc. 2003-16. The IRS found her account credible and waived the deadline, giving her 60 days from the ruling to contribute up to the withdrawn amount to an IRA as a valid rollover. The waiver does not cover required minimum distributions.

Ruling snapshot

• Question: Should the 60-day IRA rollover deadline be waived for a taxpayer defrauded into wiring her withdrawal abroad?
• Outcome: approved (waiver granted)
• Key authorities: IRC § 408(d)(3)(I); IRC § 408(d)(3)(A); Rev. Proc. 2003-16

Full text (IRS public release)

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

IRS Employee Plans

Number: 202044012 August 5, 2020
Release Date: 10/30/2020

Uniform Issue List: 408.03-00

Legend

Taxpayer A =
IRA B =
Account C =
Foreign Account D =
Financial Institution E =
Financial Institution F =
Financial Institution G =
City H =
City I =
Country J =
Individual 1 =
Individual 2 =
Individual 3 =
Amount 1 =
Year 1 =
Date 1 =
Date 2 =
Date 3 =
Date 4 =

Dear:

This is in response to your request dated March 14, 2020, as supplemented by
correspondence dated June 18, 2020, and July 22, 2020, submitted on your behalf
by 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
(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, she withdrew Amount 1 from IRA B, a
traditional IRA under section 408(a) of the Code that was maintained by Financial
Institution E. Taxpayer A asserts that she was unable to accomplish a rollover of
Amount 1 within the 60-day period prescribed by section 408(d)(3) because she
was the
Country J law enforcement officials
unless she paid them Amount 1 as

On Date 1, Taxpayer A was contacted by an individual, Individual 1,
unit of City H, which is
located in Country J. After showing Taxpayer A
Taxpayer A , Individual 1 informed Taxpayer A that

Two other individuals, Individual 2,
City H, and Individual 3, who
claimed to be the City H also
contacted Taxpayer A

Over a period of weeks, Individuals 1, 2 and 3 worked together and sent Taxpayer
in Country J for the crime of which
Taxpayer A
in City H, Taxpayer A needed
to wire Amount 1 to Foreign Account D, an account maintained by Financial
Institution G in City I of Country J, Individuals 1, 2
and 3
Amount 1
to Country J, Taxpayer A withdrew Amount 1 from IRA B on
Date 2 of Year 1. Amount 1 , Account C,
maintained by Financial Institution F,
D on Date 3. Taxpayer A from IRA B on other dates
in Year 1 to in Country J.

On Date 4, Taxpayer A contacted the City H
. Taxpayer A then contacted the
Country J embassy
Taxpayer A
City I, and
she hired an attorney in City I to help recover Amount 1. However, Taxpayer A
was unable to recover Amount 1 within the 60-day rollover period.

Based on the above facts and representations, Taxpayer A requests that the
Internal Revenue Service (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 B in Year 1.

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) 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 described in section 408(d)(3)(A)(i) from an IRA that
was not includible in gross income because of the application of the rollover
provisions in 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.

The information and documentation submitted are consistent with Taxpayer A's
assertion that she was unable to accomplish a rollover of Amount 1 within the 60-
day period prescribed by section 408(d)(3) of the Code because she was the
victim of an international fraud scheme in which individuals who falsely claimed to
be Country J law enforcement officials threatened her with extradition and
imprisonment unless she paid them Amount 1 as proof of her innocence.

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 B on
Date 2. Taxpayer A has 60 days from the issuance of this ruling to contribute an
amount not to exceed Amount 1 to an IRA account. Provided all other
requirements of section 408(d)(3), 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 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,
Adam P. Zaebst, Manager
Employee Plans Technical Group 1

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

cc: