PLR 200406056: Family medical emergency warrants IRA rollover deadline waiver

Plain-English summary

An IRA owner withdrew funds by cashier's check when a bank was sold, but did not complete a rollover within 60 days. His wife's serious injury, surgery, and difficult recovery disrupted his ability to deposit the funds, and the check remained uncashed. The IRS found that enforcing the deadline would be against equity or good conscience and waived it under § 408(d)(3)(I). The owner had 60 days from the ruling letter to contribute the amount in cash to another IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Does the spouse's medical emergency justify waiving the 60-day IRA rollover deadline?
• Outcome: Approved a waiver and a new 60-day period to contribute the funds.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

Uniform Issue List: 408.03-00
200406056

TREASURY
INTERNAL REVENUE SERVICE

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 13 2003

[illegible]

Legend:

Bank B = *******

Bank C = *****

IRA X = *****

Amount D = $***

Dear *****:

This is in response to a request submitted on your behalf by your authorized representative by letter dated July 10, 2003, for a ruling to waive the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (“Code”). Your request was supplemented with correspondence dated September 17, 2003, and September 23, 2003.

The following facts and representation have been submitted under penalties of perjury to support the ruling request.

In June of 2002, Bank B was sold to Bank C. Bank B offered its customers the opportunity to close out all IRAs, CDs, etc, without penalty by Friday June 14, 2002. You chose to withdraw your IRA Xs funds, and you received a cashier’s check for Amount D from Bank B dated June 14, 2002.

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However, on June 11, 2002, your wife was hospitalized with a serious injury requiring surgery, and her recovery was long and difficult. Documentation was submitted that describes the medical procedures performed and the ensuing recovery.

Because of the situation, you had been unable to get the proceeds of IRA X transferred, so you just put the cashier’s check in your safety deposit box until you could find time to deal with it properly. The check was never cashed.

It is represented that the IRA X distribution originated from your IRA . contributions and your SEP IRA contributions. IRA X was not a conduit rollover at any time. You propose to rollover the proceeds of the IRA distribution into another IRA in your name at another bank.

Based on the above facts, you request a ruling that the Service waive the 60- day rollover requirement with respect to the distribution of Amount D from IRA X by check dated June 14, 2002, because the failure to waive such requirement would be against equity or good conscience under the provisions of section 408(d)(3)(I) of the Code.

Section 408(d)(1) of the Code provides that, except as otherwise provided in section 408(d), any amount paid or distributed out of an IRA shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72 of the Code.

Section 408(d)(3) of the Code defines, and provides the rules applicable to IRA rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) of the Code does not apply to any amount paid or distributed out of an IRA to the individual for whose benefit the IRA is maintained if—

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(i) the entire amount received (including money and any other property) is paid into an IRA for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution; or

(ii) the entire amount received (including money and any other property) is paid into an eligible retirement plan (other than an IRA) for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received, except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross income (determined without regard to section 408(d)(3)).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) does not apply to any amount described in section 408(d)(3)(A)(i) received by an individual from an IRA if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in section 408(d)(3)(A)(i) from an IRA, which was not includible in gross income because of the application of section 408(d)(3).

Section 408(d)(3)(D) of the Code provides a similar 60-day rollover period for partial rollovers.

Section 408(d)(3)(I) of the Code provides that the Secretary may waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) of the Code where failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement. Only distributions that occurred after December 31, 2001, are eligible for the waiver under section 408(d)(3)(I) of the Code.

Rev. Proc. 2003-16, 2003-4 I.R.B. 359, provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to section 408(d)(3)(I), the Service will consider all relevant facts and circumstances, including: (1) errors committed by a financial institution; inability to complete a rollover due to death, disability, hospitalization, incarceration,

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restrictions imposed by a foreign country or postal error; (3) the use of the amount distributed (for example, in the case of payment by check, whether the check was cashed); and (4) the time elapsed since the distribution occurred.

It is represented that the 1-year rollover limitation under section 408(d)(3)(B) of the Code is not applicable in your case.

Information presented demonstrates substantial hardship by reason of the turmoil caused by your wife’s injury and hospitalization and its impact upon your ability to timely deposit the amount you received into an IRA. The failure to waive the 60-day requirement would be against equity or good conscience.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of IRA X of the Amount D. You are granted a period of 60 days from the issuance of this ruling letter to contribute Amount D, in cash, into another IRA provided all other requirements of section 408(d)(3) of the Code are satisfied, except the 60-day requirement with respect to such contribution, then, this amount will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

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

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

A copy of this letter is being sent to your authorized representative in accordance with a power of attorney on file in this office.

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If you have any questions please contact [illegible] at [illegible]

Sincerely yours,

Ada Perry
for Alan C. Pipkin, Jr., Manager
Employee Plans Technical Group 4

Enclosures:
Deleted copy of this letter
Notice of Intention to Disclose, Notice 437