EXTENSION GRANTED TO RECHARACTERIZE AMOUNTS CONVERTED TO ROTH IRA.

UIL: 408A.00-00

[1] In letters dated December 3, 2000, and March 28, 2001, you requested a ruling in which you request relief under section 301.9100-3 of the Procedure and Administration Regulations. The following facts and representations support your ruling request.

[2] Taxpayers A and B maintained IRAs X, Y, and YY, individual retirement arrangements described in Code section 408(a), with Company M. During Month M 1998, Taxpayers A and B converted IRAs X, Y, and YY to Roth IRAs XY, and YY, respectively, also with Company M. Taxpayers A is married to Taxpayer B. Taxpayer A and B's adjusted gross income for 1998 exceeded the limit found at section 408A(c)(3)(B) of the Internal Revenue Code. However, until Month J, 2000, Taxpayers A and B were not aware that their adjusted gross income for calendar year 1998 precluded their converting IRAs Y, Y, and YY to Roth IRAs Y., Y, and YY. Furthermore, Taxpayers A and B became aware of the time limit found in Announcement 99-57 and Announcement 99-104 at the same time that they discovered that their 1998 adjusted gross income exceeded permissible limits.

[3] Taxpayers A and B timely filed a calendar year 1998 joint Federal Income Tax Return.

[4] Based on the above you request the following letter ruling:

     That, pursuant to section 301.9100-3 of the regulations,

[6] Section 1.408A-5, Question and Answer-6, describes how a taxpayer makes the election to recharacterize the IRA contribution. To recharacterize an amount 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,

[7] Section 1.408A-4, Q&A-2, provides, in summary, that an individual with modified adjusted gross income in excess of $100,000 for a taxable year is not permitted to convert an amount to a Roth IRA during that taxable year. Section 1.408A-4, Q&A-2, further provides, in summary, that an individual and his spouse must file a joint Federal Tax Return to convert a traditional IRA to a Roth IRA, and that the modified adjusted gross income subject to the $ 100,000 limit for a taxable year is the modified AGI derived from the joint return using the couple's combined income.

[8] Sections 301.9100-1, 301.9100-2, and 301-9100-3 of the Procedure and Administration Regulations, in general, provide guidance concerning requests for relief submitted to the Service on or after December 31, 1997. Section 301-9100-1(c) of the regulations provides that the Commissioner of the Internal Revenue Service, 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.

[9] Section 301.9100-2 lists certain elections for which automatic extensions of time to file are granted. Section 301.9100-3 of the regulations generally provides guidance with respect to the granting of relief with respect to the elections not referenced in Section 301.9100-2. The relief requested in this case is not referenced in section 301-9100-2.

[10] 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.

[11] Section 301.9100-3(b)(1) of the temporary 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.

[12] Section 301.9100-3(c)(1)(ii) of the temporary 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 or limitations before the taxpayer's receipt of a ruling granting relief under this section.

[13] Announcement 99-57,1994-24 I.R.B. 50 (June 14, 1999) provided that a taxpayer who timely filed his/her 1998 Federal Income Tax return would have until October 15, 1999 to recharacterize an amount that had been converted from a traditional IRA to a Roth IRA.

[14] Announcement 99-104, 1999-44 I.R.B. 555 (November 1, 1999), provided that a taxpayer who timely filed his/her 1998 Federal Income Tax Return would have until December 31, 1999 to recharacterize an amount that had been converted from a traditional IRA to a Roth IRA.

[15] Taxpayers A and B timely filed their 1998 Federal Income Tax Return. As a result, they were eligible for relief under either Announcement 99-57 or Announcement 99-104. However, they missed the deadlines found in said Announcements. Therefore, it is necessary to determine if they are eligible for relief under the provisions of Section 301.9100-3 of the regulations.

[16] In this case, Taxpayers A and B were ineligible to convert their IRAs X, Y, and YY to Roth IRAs Y, Y, and YY since their adjusted gross income exceeded $100,000 for calendar year 1998. However, Taxpayers A and B believed that they were eligible to convert IRAs Y, Y, and YY to Roth IRAs until they discovered otherwise at which time the deadline in Announcement 99-104 had passed. Taxpayers A and B filed this request for section 301.9100 relief shortly after discovering that Taxpayers A and B were ineligible to convert IRAs Y, Y, and YY to Roth IRAs. Calendar year 1998 is not a "closed" tax year.

[17] With respect to your request for relief, we believe that, based on the information submitted and the representations contained herein the requirements of section 301.9100-1 and 301.9100-3 of the, regulations have been met, and that you have acted reasonably and in good faith with respect to making the election to recharacterize your Roth IRAs as traditional IRAs. Specifically, the Service has concluded that you have met the requirements of clause (iii) of section 301.9100-3(b)(1) of the regulations. Therefore, you are granted an extension of six months from the date of the issuance of this letter ruling to so recharacterize.

[18] No opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section or either the Code or regulations which may be applicable thereto.

[19] This letter is directed only to the taxpayer who requested it. Section 6100(j)(3) of the Code provides that it may not be used or cited as precedent.

                                   Sincerely yours,