PLR 200426020: IRA rollover deadline waived after medical confusion

Plain-English summary

A retiree withdrew money from a traditional IRA and deposited it into a money market account at the same financial institution. Stress and confusion caused by a medical condition prevented her from understanding the rollover rules, and she missed the 60-day deadline. The IRS found the missed deadline was beyond her reasonable control and waived it under § 408(d)(3)(I). It gave her 60 days from the ruling letter to complete a rollover, subject to the other IRA rollover requirements.

Ruling snapshot

• Question: Can the retiree receive extra time to roll over an IRA distribution after medical confusion caused her to miss the deadline?
• Outcome: Approved. She has 60 days from the ruling letter to make the rollover.
• Key authorities: IRC §§ 408(d)(3)(I), 72; Rev. Proc. 2003-16.

Full text (IRS public release)

200426020

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

Legend:

Taxpayer = [redacted]
Account A = [redacted]
Account B = [redacted]

Amount C = [redacted]

Dear Taxpayer:

This letter is in response to a request for a letter ruling dated January 29, 2004, as supplemented by additional information dated March 10, 2004, from your authorized representative, in which you have applied for a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code ("Code").

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested:

You are a [redacted] year old retired single woman. On [redacted], you withdrew funds totaling Amount C from Account A, a traditional individual retirement account (“IRA”) described under section 408(a) of the Code. On the same day, you deposited Amount C

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into Account B, a money market account with the same financial institution. To date, Amount C remains in Account B. Due to stress and confusion, caused by a medical condition, you were unable to understand the rollover requirements for this distribution. As a result, you failed to complete the rollover of Amount C from Account A to another eligible IRA within the 60-day limit contained in section 408(d).

Based on the above facts and representations, you request that the Internal Revenue Service waive the 60-day rollover requirement with respect to the distribution of Amount C because the failure to waive such requirement would be against equity or good conscience.

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-

(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

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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) where the 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).

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; (2) inability to complete a rollover due to death, disability, hospitalization, incarceration, 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.

The information presented by you indicates that you were unable to complete the rollover of the [redacted] distribution because of confusion due to your medical condition. Under these circumstances, you could not reasonably satisfy the requirement that the funds be deposited in an IRA within 60 days of the distribution from Account A. The failure to deposit the funds into an eligible retirement plan, such as a rollover IRA, within the 60-day period was beyond your reasonable control, and 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 Amount C. You are granted a period of 60 days from the issuance of this ruling letter to make your rollover. Provided all other requirements of section 408(d)(3), except the 60-day requirement, are met with respect to such contributions, these amounts will be considered rollover contributions within the meaning of section 408(d)(3).

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

If you wish to inquire about this ruling, please contact [redacted], SE:T:EP:RA:T1, I.D. at [redacted].

Sincerely yours,

Manager
Employee Plans Technical Group 1

Enclosures:

Deleted Copy of this Letter

Notice of Intention to Disclose, Notice 437

Copy of Notification Letter (Form 1155) to Authorized Representative

cc: