TBH I am extrapolating that interpretation from the way I read the text of the Rev Code. However, I was just about to post about a site that I came across that seems to specialize in problems like this one. It has hundreds of posts about rollovers and indirect rollovers and the 365 day rule, eg. searching on "indirect" gives https://www.irahelp.com/search/ft/indirect
(includes their blog entries and mailbag questions and forum threads).
I think some people here even post over there so I don't know why they didn't recommend it immediately. Maybe you still have time to post a question or contact them directly for help - they have an 800 number. And look at their Oct 2017 newsletter preview https://www.irahelp.com/content/october-2017
which is all about the 365 day rule. You have to subscribe to read it, but the front page lists topics like:
- Defining a Year
- Multiple Distributions from Different IRAs on the Same Day
- Roth IRA Conversion Fix - Only if Caught Within 60 Days
- Rollover to an Employer Plan Fix - Only if Caught Within 60 Days
ie. everything you have questions about. Here's their blog post that probably covers the first item and seems to support what I said about counting the day you received each check, not when they were deposited: https://www.irahelp.com/slottreport/wha ... a-rollover
, read down to the 4th paragraph.
Here's the actual Sec. 408(d)(3)(B) that I was making my interpretation from
This paragraph does not apply to any amount described in subparagraph (A)(i) received by an individual from an individual retirement account or individual retirement annuity if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in that subparagraph from an individual retirement account or an individual retirement annuity which was not includible in his gross income because of the application of this paragraph.
Basically I think it says that when you receive a distribution, you look back 1 year to see if you had received another distribution that counted as a rollover. If you did, then the new one can't be a rollover. It doesn't say anything about when the rollover was deposited - so that's why I think we can get the weird ordering where depositing the first check last causes the second check (which was deposited first) to become a failed rollover.
You just have to be pretty sure that you remember getting the larger one first, and then a day later getting the smaller one. (I frequently get statements mailed at the same time from my bank but receive them on different days.)
btw, do the check images you mentioned show the timestamp on the backs of each deposit? Also, I know this is incredibly unlikely after so many eyeballs have looked, but is the front of the check made out to <your name> or "Ally Bank FBO <your name>"? I can't believe Merrill didn't use the latter one if you specifically told them you were doing a rollover.