My 77 year old client took his entire IRA account ($106,000)out of an annuity at ING with the intent of rolling at least $80,000 over to a different annuity at another company within 60 days. Weeks ago we had set up another IRA account with the minimum required for that company of $5,000 as a repository to quickly deposit the funds when they came in. The reason we did not do a custodian to custodian transfer was that he needed to borrow the funds to pay off a lien incurred by his son-in-law so that he could sell his personal residence. An escrow person dropped the ball and did not notify the bankruptcy attorney and then went on vacation for two weeks. She will return tomorrow with about 40 emails and phone messages documenting the fact that she screwed up. The 60th day is today and he has not received his funds yet and doesn’t know when he will. He is considering legal action against the escrow company/person responsible for not completing her promised duties and costing him about $38,000 in taxes (that’s on the whole amount though.)

I have researched the exceptions to the 60 day rule and it looks like the IRS will not like the fact that he used the money as a short term loan and cashed the check from ING. Still, he did not have ignorance of the law and had every intention of meeting the 60 day rule. It is because of circumstances beyond his control that he didn’t meet the 60 days although not because of physical or mental or emotional illness, incarceration, or any of the other reasons the IRS gives leniency for.

Do you think this case is worth requesting a Private Letter Ruling based on the facts and circumstances? Thank you in advance.