IRS written determination 201427025

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.

201427085

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

APR 10 2014

TREASURY
REVENUE SERY

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408A.00-00

XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

TiEP. RA.TI

XXXXXXXXXXXXXX

XXXXXXXXXXXXXX

Legend:

Taxpayer A

= XXXXXXXXXXXXXX

IRA B

= XXXXXXXXXXXXXX

IRA C

= XXXXXXXXXXXXXX

IRA D

= XXXXXXXXXXXXXX

Financial Institution E = XXXXXXXXXXXXXX

Financial Institution F = XXXXXXXXXXXXXX

Financial Advisor G = XXXXXXXXXXXXXX

Amount 1
= XXXXXXXXXXXXXX

Amount 2
= XXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXX:

This is in response to a letter dated December 5, 2012, as supplemented by
correspondence received on February 6, 2013 and January 8, 2014, in which
your authorized representative requests, on your behalf, relief under section
301.9100-3 of the Procedure and Administration Regulations (the "regulations").
The following facts and representations were submitted in connection with your
request.

Taxpayer A maintained IRA B with Financial Institution E. In January 2010,
Taxpayer A transferred and converted a portion of IRA B equal to Amount 1 into
Roth IRA C maintained by Financial Institution E. Also, in January 2010,
Taxpayer A transferred and converted a portion of IRA B equal to Amount 2 into
Roth IRA D maintained by Financial Institution F.

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Taxpayer A represents that Financial Advisor G had advised him on financial
issues including Taxpayer A's retirement accounts for a number of years. In
2009, Taxpayer A and Financial Advisor G discussed the opportunity to roll over
Taxpayer A's IRA B to a Roth IRA in 2010.

As part of the discussion, Financial Advisor G informed Taxpayer A of the look
back rule in sections 408A(d)(6) and 408A(d)(7) of the Internal Revenue Code
(the "Code") which would allow Taxpayer A an opportunity to recharacterize the
Roth IRA conversion as a roll-over from one traditional IRA account to another
traditional IRA account. Taxpayer A understood that making the
recharacterization would be to his advantage if the value of his investments in the
converted Roth IRAs were to decline. At no time in the discussion was Taxpayer
A made aware of the rules under Sections 408A (d)(6) and 408A(d)(7) which
impose a strict deadline for making such a recharacterization. Taxpayer A's
deadline for making such a recharacterization was October 17, 2011, which was
the last date including extensions for filing an income return for 2010, the year of
the conversion. Taxpayer A assumed that the deadline for making the
recharacterization was the due date for filing his 2011 income tax returns on the
belief that 2011 was the first year that he would be required to recognize income
from the conversions absent a recharacterization.

Taxpayer A was granted an automatic six month extension for filing his 2011
income tax return. Under his erroneous belief that he was then still eligible to
effect a recharacterization, on or about October 17, 2012, Taxpayer A sought to
have his Roth IRA conversions recharacterized only to be advised of the expired
deadline for a recharacterization. Taxpayer A has not received any notice or
other communication from the Internal Revenue Service regarding his failure to
effect a timely recharacterization.

Based on your submission and the above facts and representations, you request
a ruling that pursuant to section 301.9100-3 of the regulations, Taxpayer A be
granted an extension of time to recharacterize Roth IRAs C and D as traditional
IRAS.

With respect to the Taxpayer A's request for relief under section 301.9100-3 of
the regulations, section 408A(d)(6) of the Code and section 1.408A-5 of the
Federal Income Tax Regulations ("I.T.regulations") provide that, except as
otherwise provided by the Secretary, a taxpayer may elect to recharacterize an
IRA contribution made to one type of IRA as having been made to another type
of IRA by making a trustee-to-trustee transfer of the IRA contribution, plus
earnings, to the other type of IRA. In a recharacterization, the IRA contribution is
treated as having been made to the transferee IRA and not the transferor IRA.
Under section 408A(d)(6) of the Code and section 1.408A-5 of the I.T.
regulations, this recharacterization election generally must occur on or before the
date prescribed by law, including extensions, for filing the taxpayer's federal
income tax returns for the year of the IRA contributions.

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Section 1.408A-5, Question & Answer ("Q&A")-6 of the I.T. regulations describes
how a taxpayer makes the election to recharacterize the IRA contribution. To
recharacterize an amount that either has been contributed to a Roth IRA or that
has been converted from a traditional IRA to a Roth IRA: (1) the taxpayer must
notify the Roth IRA trustee of the taxpayer's intent to recharacterize the amount;
(2) the taxpayer must provide the trustee (and the transferee trustee, if different
from the transferor trustee) with specified information that is sufficient to effect
the recharacterization; and, (3) the trustee must make the transfer.

Sections 301.9100-1, 301.9100-2, and 301.9100-3 of the regulations provide
guidance concerning requests for relief submitted to the Service on or after
December 31, 1997.

Section 301.9100-1(c) provides that the Commissioner of Internal Revenue, in
his discretion, may grant a reasonable extension of the time fixed by a regulation,
a revenue ruling, a revenue procedure, a notice, or an announcement published
in the Internal Revenue Bulletin for the making of an election or application for
relief in respect of tax under, among others, Subtitle A of the Code.

Section 301.9100-2 of the regulations lists certain elections for which automatic
extensions of time to file are granted. Section 301.9100-3 generally provides
guidance with respect to the granting of relief with respect to those elections not
referenced in section 301.9100-2. The relief requested in this case is not
referenced in section 301.9100-2.

Section 301.9100-3 of the regulations provides that applications for relief that fall
within section 301.9100-3 will be granted when the taxpayer provides sufficient
evidence (including affidavits described in section 301.9100-3(e)(2)) to establish
that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief
would not prejudice the interests of the Government.

Section 301.9100-3(b)(1) of the regulations provides that a taxpayer will be
deemed to have acted reasonably and in good faith (i) if its request for section
301.9100-1 relief is filed before the failure to make a timely election is discovered
by the Service; (ii) if the taxpayer inadvertently failed to make the election
because of intervening events beyond the taxpayer's control; (iii) if the taxpayer
failed to make the election because, after exercising reasonable diligence, the
taxpayer was unaware of the necessity for the election; (iv) the taxpayer
reasonably relied upon the written advice of the Service; or (v) the taxpayer
reasonably relied on a qualified tax professional, including a tax professional
employed by the taxpayer, and the tax professional failed to make, or advise the
taxpayer to make, the election.

Section 301.9100-3(c)(1)(ii) of the regulations provides that ordinarily the
interests of the Government will be treated as prejudiced and that ordinarily the
Service will not grant relief when tax years that would have been affected by the
election had it been timely made are closed by the statute of limitations before
the taxpayer's receipt of a ruling granting relief under this section.

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In this case, Taxpayer A failed to recharacterize his Roth IRAs back to traditional
IRAs by the date permitted by law. That date was October 17, 2011, the last date
(including extensions) for filing his income tax return for 2010. Financial Advisor
G had informed Taxpayer A of the recharacterization rules but did not discuss the
strict deadline for making such a recharacterization. Therefore, it is necessary to
determine whether Taxpayer A is eligible for relief under the provisions of section
301.9100-3 of the regulations. At or around October 17, 2011, the value of the
investments in the Roth IRA C and Roth IRA D began to decline so that indeed a
recharacterization would have been advantageous to Taxpayer A. However, the
absence of such a recharacterization is evidence that Taxpayer A, despite his
efforts to comply with applicable rules, was unaware of the deadline for making a
recharacterization election. Taxpayer A did not discover his mistake until October
17, 2012, after the due date for recharacterizing the 2010 Roth IRA conversions
had passed.

Thus, Taxpayer A satisfies clause (v) of section 301.9100-3(b)(1) because he
reasonably relied on the advice of Financial Advisor G concerning the Roth IRA
conversion rules. In addition, because the statute of limitations on the Taxpayer
A's 2010 return remains open, the interests of the government would not be
prejudiced by providing relief.

Accordingly, we rule that, pursuant to section 301.9100-3 of the regulations,
Taxpayer A is granted a period not to exceed 60 days from the date of this letter
to recharacterize Roth IRA C as a traditional IRA, and is granted a period not to
exceed 60 days from the date of this letter to recharacterize Roth IRA D as a
traditional IRA.

This letter assumes that the above IRAs qualify under either section 408 of the
Code or section 408A of the Code at all relevant times.

This letter is directed only to the taxpayers who requested it. Code section
6110(k)(3) provides that it may not be used or cited as precedent.

A copy of this letter is being sent to your authorized representative pursuant to a
Power of Attorney on file in this office.

If you wish to inquire about this ruling, please contact XXXXXXXXXXXXXX
(ID XXXXXXXX) at (XXX) XX-XXXX. Please address all correspondence to
SE:T:EP:RA:T1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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201427025

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