PLR 200704042: Rollover waiver denied for deliberate withdrawal for future care

Plain-English summary

A daughter acting under a durable power of attorney withdrew IRA funds for her father's future nursing-home care. Her father had a mental impairment, and she learned the withdrawal's tax consequences only after the rollover deadline expired. The IRS found no evidence that the circumstances described in Revenue Procedure 2003-16 prevented a timely rollover. It viewed the request as an attempt to undo a deliberate withdrawal after discovering its adverse tax consequences. It therefore denied a waiver of the 60-day rollover deadline under section 408(d)(3).

Ruling snapshot

• Question: Does discovering the tax cost of an IRA withdrawal for future nursing-home care justify a rollover deadline waiver?
• Outcome: Denied.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

200704042

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

NOV - 3 2006

T:EP:RA:UK

UIL Code: 408.03-00

Taxpayers A =
Individual B =
Amount D =

Dear :

This is in response to a letters dated January 20, 2006, submitted on your behalf by your authorized representative, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (the Code).

Taxpayer A, through his authorized representative, represents that he received a distribution from his IRA totaling Amount D. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to mistake made by Taxpayer A’s duly appointed representative in not realizing the tax consequences of the withdrawal.

Taxpayer A suffers from a mental impairment disease. In April 2005, Individual B, acting under a Durable Power of Attorney on behalf of her father, Taxpayer A, withdrew Amount D from Taxpayer A's IRA in order to provide for his future nursing home care. Individual B realized the tax consequences of the withdrawal after discussions with the family CPA and after the 60-day rollover period had expired.

Based on the facts and representations, you request that the Internal Revenue Service waive the 60-day rollover requirement with respect to the distribution of Amount D because the failure to waive such requirement would be a hardship and 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

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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 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 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) of the Code.

Revenue Procedure 2003-16, 2003-4 I.R.B. 359, (January 27, 2003) 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 Taxpayer A demonstrates that Individual B acting under a Durable Power of Attorney withdrew Amount D in order to provide for Taxpayer A's future nursing home care. The information presented does not indicate that any of the factors described in Rev. Proc. 2003-16 prevented Taxpayer A or Individual B, acting on

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his behalf, to accomplish a timely rollover. Rather, it appears from the facts that Individual B intended to use the IRA distribution to pay for future nursing home care for Taxpayer A and now seeks to undo the transaction because of the adverse tax consequences.

Thus, the Service will not grant any extension to the 60-day rollover period of Code section 408(d)(3)(A)(1) in this case.

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.

A copy of this letter has been sent to your authorized representative in accordance with a Power of Attorney on file in this office.

If you wish to inquire about this ruling, please contact

at Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

Frances V Sloan

Frances V. Sloan, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted copy of letter ruling
Notice of Intention to Disclose