December 12, 2005 – The IRS, in Private Letter Ruling (PLR) 200549017, has rejected a taxpayer’s request to allow a distribution from a qualified retirement plan to be belatedly rolled to an IRA. The taxpayer received a distribution from a qualified employer stock option plan that at the time was considered an eligible rollover distribution. However, the taxpayer chose at the time of distribution not to roll the assets to an IRA or another employer plan, but rather to contribute the assets to a joint account with her spouse. The taxpayer claimed not to understand the tax consequences of the distribution until later (after more than the required 60 day limitation) being informed by the IRS that the distribution should have been included in income and taxed in the year of distribution.
Since there appeared to be no failure on the part of the employer to give proper notice of tax treatment options at the time of distribution, and no failure of a financial entity to follow rollover instructions, the IRS declined to waive the 60-day rollover limitation.
PLR 200549017 may be accessed at http://www.irs.gov/pub/irs-wd/0549017.pdf.