PLR 200804027 - 60-Day Rollover Period Waived Due to Bad Advice from Financial Advisor

 Analysis By Denise Appleby

The Individual’s (Taxpayer’s) Request

The taxpayer requested that the IRS grant him an extension of the 60-day period that applies to rollover contributions, because he did not complete the rollover within the 60-day deadline due to bad advice from his financial advisor.  An extension of the 60-day deadline would allow him to complete a rollover even though the 60-day deadline had passed.

Let’s call the taxpayer TJ

What (TJ Says) Happened

Based on the advice of his financial advisor, TJ took a distribution from his IRA and deposited the amount to a regular (non-IRA) account where the assets were invested in liquid assets. TJ failed to complete a rollover within 60-days, due to an error made by his financial advisor.

Who is TJ’s Financial Advisor  

TJ’s financial advisor is an 86 year old practicing CPA, who had been TJ’s tax preparer and advisor for over 55-years.

The Mistake that TJ Say’s his Financial Advisor Made

TJ’s financial advisor told him to take all the funds from his IRA to find a better investment for the funds. However, his financial advisor failed to inform him about the 60-day rule.

How TJ Found Out

TJ later consulted with another financial advisor, who told him that the advice to take a distribution without completing a rollover was “incorrect from both a financial and tax perspective”.

The IRS’ Ruling

The IRS looked at IRC § 408(d)(3)(I) Waiver of 60-day requirement , where it provides that “ The Secretary may waive the 60-day requirement … 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; and Revenue Procedure 2003-16 , which provides that “In determining whether to grant a waiver, the Service will consider all relevant facts and circumstances, including: (1) errors committed by a financial institution… and (4) the time elapsed since the distribution occurred.  

They concluded that the information provided by TJ demonstrates that he relied on the advice of his financial advisor who is “licensed and practicing CPA, who was aware of the tax ramifications of his advice”, and “based on the financial error“ of his financial advisor, TJ failed to accomplish a timely rollover. As a result, they allowed TJ to complete the rollover 60-days from the date they issued PLR 200804027

Reminder…

PLRs give a good idea of how the IRS could respond to an issue with a similar set of facts and circumstances. However, they cannot be cited as precedence or used as legal references.

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