Fraud victim received a waiver of the IRA 60-day rollover deadline

Plain-English summary

An IRA owner withdrew funds after callers impersonating government and law-enforcement officials convinced her that she was an identity-theft victim and needed to move the money to a supposed safety facility. The scammers used her personal information, false official identities, and a fake police-chief call to persuade her to make ten wire transfers. She later reported the fraud to local police and a federal agency, which eventually told her that the scheme's mastermind had been arrested. The IRS found that her failure to complete a rollover within 60 days resulted from the fraud scheme, an event beyond her reasonable control. It waived the deadline and gave her 60 days from the ruling letter to contribute the distributed amount to a rollover IRA, assuming all other rollover requirements are met.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover deadline when the distribution was taken and transferred because of an elaborate impersonation fraud?
• Outcome: approved, with 60 days from the ruling to complete the rollover
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, DC 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Release Number: 202430010
Release Date: 7/26/2024                         April, 2024

Uniform Issue List: 408.03-00

LEGEND:

Taxpayer A =

IRA B       =
Bank C      =

Agency D    =
Agency E    =
Agency F    =
Agency G    =

City H      =
City I      =

Individual 1 =
Individual 2 =
Individual 3 =
Individual 4 =
Individual 5 =
Amount 1     =
Amount 2     =
Amount 3     =
Amount 4     =
Amount 5     =

Date 1       =
Date 2       =
Date 3       =
Date 4       =
Date 5       =
Date 6       =
Date 7       =
Year 1       =

2

Dear

This is in response to your request dated December 26, 2023, as supplemented by
correspondence dated February 22, 2024, and March 18, 2024, 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”).

The following facts and representations have been submitted under penalty of perjury in
support of the ruling requested

Taxpayer A represents that on Date 2 she received a distribution from IRA B totaling
Amount 1. Taxpayer A asserts that her failure to accomplish a rollover of Amount 1
within the 60-day period prescribed by section 408(d)(3) was because she was the
victim of a fraud scheme.

On Date 1, Taxpayer A received a phone call from a man who identified himself as
Individual 1 falsely claiming to be from the Agency D and told her that she was
identified as a victim of identity theft. She was also told by Individual 2, a man
impersonating as a senior investigating officer of the Agency E, that her name, social
security number, and address were found inside an abandoned car during a drug and
money laundering operation. Individual 2 told Taxpayer A that he was working with the
Agency D to protect victims of fraud and that was the reason for their phone call.
Individual 1 was able to provide Taxpayer A with her full name, home address and
correct social security number, as well as some other personal information, leading
Taxpayer A to believe the situation was legitimate.

To secure her funds, Taxpayer A was told she had to transfer the balance of IRA B to a
safety locker facility. Once the funds were secured, a person posing as an agent of
Agency F, Individual 3, would come to her house to deliver a check in the amount
transferred to the safety locker. She was told that she would have a lockbox that only
she can open with a combination she was given. And a check for the funds she
transferred from IRA B would be in the box.

3

On Date 3, the transfer of Amount 1 from IRA B to Bank C was completed.

For the next few days, on Dates 3, 4, 5 and 6, Taxpayer A was on the phone with
Individual 1 He provided her bank names, routing, and account numbers to transfer
funds to. He told her never to exceed an Amount 2 transfer as it may look suspicious to
the banks. Taxpayer A visited multiple Bank C locations and made ten wire transfers
transactions. Per Individual 1’s instructions, Taxpayer A made four transfers of
Amount 3; five transfers of Amount 4 and one transfer of Amount 5.

After a few transfers were made, Taxpayer A began to doubt the operation's legitimacy.
She questioned Individual 1, and he reassured her by having the Chief of Police of
City H, Individual 4 call and let her know the operation was genuine.

Unfortunately, it was too late before Taxpayer A realized that she had been defrauded.
She called the City I police department on Date 7 and spoke to Individual 5, who came
to her house and took a police report. Taxpayer A also reported the crime to the
Agency G. Sometime in Year 1, the Agency G called Taxpayer A to inform her that
the mastermind behind the theft operation had been arrested and was now serving his
sentence.

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

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 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)).

4

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

Section 3.02 of Rev. Proc. 2003-16, 2003-4 I.R.B. 359 (January 27, 2003) 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 her assertion that her failure to accomplish a timely rollover was caused by her
being a victim of a fraud scheme.

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 1 from IRA B.
Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount 1 into a Rollover IRA. Provided all other requirements of section
408(d)(3) of the Code, except the 60-day requirement, are met with respect to such
contribution Amount 1 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 401(a)(9) 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.

5

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.

A copy of this letter has been sent to your authorized representative in accordance
with a power of attorney on file in this office.

If you wish to inquire about this ruling, please contact  at .

Sincerely yours,

Frederick L. Parker, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted copy of this letter
Letter 437, Notice of Intention to Disclose

CC: