The IRS granted a taxpayer who had been the victim a fraud an extension of time beyond the 60-day deadline to complete a rollover of her IRA funds in PLR 202244029.[1]

Facts of the Ruling Request

The taxpayer outlined the following facts in presenting her request for additional time to complete the rollover of funds from her IRA account:

Taxpayer A represents that on Date 2, she withdrew Amount 1 from IRA B, a traditional IRA under section 408(a) of the Code. 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 victim of a fraud scheme.[2]

She described the beginning of the fraud as follows:

On Date 1, Taxpayer A was trying to access her bank account when she received an alert on her computer to contact a representative from Company C. As instructed, she contacted Individual 1, who falsely claimed to work for Company C. Individual 1 told her that hackers from Country F had downloaded illegal material onto her computer and taken money from her bank account. Individual 1 instructed Taxpayer A to contact Individual 2. Falsely claiming to be an employee in the anti-fraud department of her bank, Individual 2 told Taxpayer A that she would have to secure her funds to protect them from the hackers and that the illegal material on her computer was a federal crime. Individual 2 also put Taxpayer A in contact with Individual 3. Individual 3 falsely claimed to be a federal officer with Agency D and assured Taxpayer A that once they secured all her assets, he would given her a check to reimburse her for withdrawals made from her accounts. Individuals 2 and 3 told Taxpayer A not to tell anyone and warned her that she would be arrested for illegal material on her computer if she contacted law enforcement.[3]

At this point the fraudsters had the taxpayer hooked, and now they worked to reel her in and separate her from her funds:

At Individual 2’s direction, Taxpayer A withdrew money from her non-IRA accounts. In addition, on Date 2, following the fraudsters’ instructions, Taxpayer A withdrew Amount 1 from IRA B. On Date 3, after the 60-day rollover period for the distribution of Amount 1 from IRA B had expired, Individual 2 and Individual 3 told Taxpayer A that she could tell her spouse about the withdrawals.[4]

The perpetrators decided this point was a good time to stop dealing with the taxpayer, since they had her funds and her spouse, just now informed about the transactions, might start asking questions.

At this point the taxpayer discovered she’d fallen for a scam:

Taxpayer A then discovered that Individual 2's and Individual 3's phone numbers had been reassigned or were no longer in service. On Date 4, Taxpayer A contacted the local office of Agency E to report the fraud.[5]

Relief Requested

At this point the taxpayer decided to ask the IRS for relief so that she could return the IRA funds to a retirement account:

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 on Date 2.[6]

The ruling notes that the IRS has the authority to issue this relief under provisions Congress inserted into IRC §408 and the IRS described the procedures under Revenue Procedure 2003-16 when such relief will be granted upon the taxpayer’s request for a private ruling:

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.[7]

The IRS determined that this case was one in which it was appropriate to grant relief, and such relief was granted:

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 a fraud scheme.

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 Bon Date 2. Taxpayer A has 60 days from the issuance of this letter to contribute an amount not to exceed Amount 1 into an IRA Provided all other requirements of section 408(d)(3), except the 60-day requirement, are met with respect to such contribution, the contribution will be considered a rollover contribution within the meaning of section 408(d)(3).[8]

[1] PLR 202244029, November 4, 2022, https://www.taxnotes.com/research/federal/irs-private-rulings/letter-rulings-%26-technical-advice/ira-distribution-rollover-requirement-waived-for-fraud-victim/7f9zj (retrieved November 5, 2022)

[2] PLR 202244029, November 4, 2022

[3] PLR 202244029, November 4, 2022

[4] PLR 202244029, November 4, 2022

[5] PLR 202244029, November 4, 2022

[6] PLR 202244029, November 4, 2022

[7] PLR 202244029, November 4, 2022

[8] PLR 202244029, November 4, 2022