ince the dawn of individual retirement accounts (IRAs), taxpayers could roll over distributions tax-free into another IRA within 60 days of the date the distribution was received. However, the IRS had consistently argued that it could not extend (waive) the 60-day period, except in statutorily prescribed circumstances. Thus, even when a taxpayer clearly intended to complete a rollover and acted in good faith, and the failure to complete it was entirely beyond his or her control, there was no remedy.
In revenue procedure 2003-16, the IRS explained how taxpayers can apply for a waiver of the 60-day rollover period and when a situation merits an automatic waiver.
In determining whether to grant a waiver, the service considers all relevant facts and circumstances; how taxpayers used the amount distributed (for example, for payments made by check, whether they cashed the check); and the time elapsed after the distribution. Automatic approval is granted (and, thus, no application to the IRS is needed) when a valid rollover would have been completed but for a financial institution error. In any case the distribution must have occurred after 2001.
Letter rulings 200401020, 200401023 and 200402028 (financial institution mistake).
Letter ruling 200402029 (taxpayer’s physical incapacity prevented compliance with rollover requirements).
Letter rulings 200407025, 200406049 and 200406050 (taxpayer was hard of hearing, mentally disabled or recently widowed and suffering illness).
Letter rulings 200406051 and 200405013 (account administrator error or failure to notify).
Letter ruling 200407023 (bank’s erroneous advice).
Letter ruling 200406054 (inclement weather barred taxpayer from making rollover until after 60-day period).
For more information see the Tax Clinic, edited by Anthony Bakale, in the August 2004 issue of The Tax Adviser.
—Lesli S. Laffie, editor