IRS written determination 201427029

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

TREASURY
REVENUE GERV

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

201427029

APR 0 7 2014

Uniform Issue List: 408.03-00

TIEPiRA: +3

Legend:

Taxpayer A

=

Financial Entity B

=

Advisor C

=

Property D

=

IRA X

=

Amount 1

=

Amount 2

=

Amount 3

=

Dear

This is in response to your request dated April 25, 2013, submitted on your
behalf by your authorized representative, as supplemented by a letter dated
March 10, 2014, 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
penalties of perjury in support of the ruling requested:

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Taxpayer A arranged for a transfer of Amount 1 from Taxpayer's IRA X to
Financial Entity B, believing such transfer to be a trustee-to-trustee transfer to a
new individual retirement account (IRA) established with Financial Entity B.
Taxpayer A asserts that he was prevented from accomplishing a trustee-to-
trustee transfer or a rollover of this distribution due to fraud on the part of
Financial Entity B and Advisor C.

In 2007, Taxpayer A engaged in discussions with Advisor C, the president
of Financial Entity B, about investing some of his IRA assets in real estate.
Advisor C told Taxpayer A that he would need to create a self-directed real estate
IRA, which would then invest in real estate through a limited liability company.
Advisor C told Taxpayer A that Financial Entity B was providing custodial services
to other self-directed real estate IRAs, and that it could do the same for Taxpayer
A.

Advisor C sent Taxpayer A an "Investment Management Agreement for
Self-Directed Real Estate IRA" with Financial Entity B, dated May 7, 2007. Under
this agreement, Financial Entity B would serve as a custodian, and could receive
assets through an IRA rollover or a contribution to an IRA. Financial Entity B
would also charge annual fees "for its services as Custodian of Self-Directed Real
Estate IRA assets." Advisor C sent Taxpayer A forms to fill out and sign to begin
the setup of his IRA.

Advisor C also assisted Taxpayer A in establishing the "Taxpayer A Real
Estate IRA, LLC", which was formed for the purpose of holding real estate
purchased with funds from Taxpayer A's new IRA.

On May 23, 2007, at Taxpayer A's direction, the custodian of IRA X issued
a check for Amount 1 from IRA X, made payable to Financial Entity B, f/b/o
Taxpayer A, which was intended to be a trustee-to-trustee transfer to Taxpayer
A's new IRA at Financial Entity B. Taxpayer A received a confirmation of deposit
showing that this amount "had been credited to your Self-Directed Real Estate
IRA Account."

On January 15, 2009 Taxpayer A directed the custodian of IRA X to
transfer Amount 2 from IRA X to Financial Entity B, which was also intended to be
a trustee to trustee transfer to Taxpayer A's IRA at Financial Entity B.

The amounts transferred from IRA X to Taxpayer A's account at Financial
Entity B were used to purchase Property D and to make improvements on such
property. Property D was purchased by the Taxpayer A Real Estate IRA, LLC.

Following the purchase of Property D, Taxpayer A received quarterly
statements describing Taxpayer A's account with Financial Entity B as a Real
Estate IRA account. The statements included Property D as an asset of the
account.

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Despite these representations, Financial Entity B was not qualified to serve
as a custodian of an IRA, and had not actually established a qualifying IRA.

In February 2011, Advisor C was charged with securities fraud and mail
fraud under federal law. Taxpayer B learned that he was one of several similarly-
situated individuals affected by what the court later characterized as "a massive
Ponzi scheme" by Advisor C. Advisor C pled guilty to the fraud charges, and
agreed to forfeit to the federal government his interest in numerous properties,
including those which Financial Entity B had represented it held as an IRA
custodian. Property D was among the properties Advisor C agreed to forfeit to
the government.

Individuals whose property had been held by Financial Entity B in what it
had represented were IRA accounts challenged the government's right to take
such property through forfeiture. Prolonged litigation then ensued. Ultimately, in
February 2013, the court rejected the government's claim that such properties
were subject to forfeiture and removed them from the forfeiture order.

Taxpayer A filed this request promptly after issuance of the court's order.

Based on these facts and representations, you request a ruling that the
Internal Revenue Service waive the 60 day rollover requirement contained in
section 408(d)(3) of the Code with respect to the May 23, 2007 distribution of
Amount 1 from IRA X, and the January 15, 2009 distribution of Amount 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

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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)(D) of the Code provides a similar 60-day rollover period
for partial rollovers.

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) does 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 which was not includible in gross income because of
the application of section 408(d)(3).

Section 408(d)(3)(E) of the Code provides that the rollover provisions of
section 408(d) do not apply to any amount required to be distributed under
section 408(a)(6).

Section 408(d)(3)(1) of the Code provides that the Secretary 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.

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.

Revenue Ruling 78-406, 1978-2 C.B. 157, provides, in general, that the
direct transfer of funds from one IRA trustee to another IRA trustee does not
result in such funds being treated as paid or distributed to the participant and
such transfer is not a rollover contribution.

Section 408(a) of the Code defines an individual retirement account as a
trust that meets certain conditions, including the requirement that the trustee of
the trust must be a bank (as defined in Section 408(n) of the Code) or other
person who demonstrates, to the satisfaction of the Secretary, that the manner in
which he will administer the account will be consistent with the requirements of

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such section. Section 408(h) provides that a custodial account may be treated as
a trust if the custodian meets those requirements, and if the account would
otherwise satisfy the 408(a) requirements. Section 1.408-2(e) of the Income Tax
Regulations sets forth stringent requirements an applicant must meet in order to
be approved to serve as an IRA trustee or custodian.

The information presented and documentation submitted by Taxpayer A is
consistent with his assertion that he intended to make a trustee-to-trustee transfer
of Amount 1 and Amount 2 from IRA X to a new IRA established with Financial
Entity B, and that he reasonably believed that a new IRA had been established.
The information presented and documentation submitted is also consistent with
the assertion that Taxpayer A's failure to accomplish a trustee-to-trustee transfer
or a timely rollover of such amounts was due to fraud on the part of Advisor C.

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 and Amount 2 from IRA X. Taxpayer A is granted a period of 60 days from the
issuance of this ruling letter to contribute up to Amount 3 (the total of Amounts 1
and 2) 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, the contribution of up to Amount 3 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 408(a)(6) 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.

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 *************** (ID
************ at ( *** ) \*\*\*-\*\*\**. Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,
Jun B. Whiny

Laura B. Warshawsky, Manager,
Employee Plans Technical Group 3

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201427029

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

CC: