PLR 200740017: Hurricane Katrina disruption justified a late IRA rollover waiver

Plain-English summary

An IRA owner withdrew funds to buy a home but did not use them for that purpose. As the 60-day rollover deadline approached, Hurricane Katrina threatened the owner's relatives and aggravated a pre-existing medical condition. The owner deposited the funds into another IRA less than 10 days after the deadline, following an accountant's advice. The IRS found that these circumstances prevented a timely rollover and waived the deadline under section 408(d)(3)(I). The ruling allowed 60 days from its issuance to contribute the amount to a rollover IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Would the IRS waive the 60-day IRA rollover deadline after the hurricane-related disruption?
• Outcome: Yes; the owner received 60 days from the ruling date to contribute the amount to a rollover IRA.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

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

JUL 13 2007

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List 408.00-00

Number: 200740017
Release Date: 10/5/2007 T:EP:RA:T3

Legend:
Company A =
Date E =
Date F =
Date G =
Amount H =

IRA X =
IRA Y =

Dear

This is in response to your request dated February 10, 2007, for a ruling to waive the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (the “Code”). Correspondence dated April 16, 2007, and June 21, 2007, supplemented the

request.

200740017

Under penalty of perjury, you have submitted the following facts and representations:

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You are under age 70 ½, and represent that you received a distribution from IRA X, maintained at Company A totaling Amount H. You assert that your failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to effects Hurricane Katrina had on your family and relatives which aggravated a pre-existing medical condition and rendered you incapable of handling your financial affairs in an appropriate manner until your family was safe. You further represent that Amount H has not been used for any other purpose

On Date E, 2005, you withdrew Amount H from IRA H for the purpose of purchasing a home. However, the funds were never used for that purpose and you intended to return Amount H to an IRA. However, as the end of the 60-day period for rolling over the funds to an IRA approached, Hurricane Katrina struck the Gulf Coast area. You had relatives in the area that was affected by Hurricane Katrina and became stressed over your relatives safety and health. You heard nothing from them and attempted to travel to the area. Due to the stress of not knowing the fate of your relatives, the 60-day rollover period passed. On Date F, 2005 (less than 10 days after the 60-day rollover period expired), you contacted your accountant who advised you to put the money into an IRA, even though the 60-day rollover period had passed. At that time you deposited your money in IRA Y.

A letter from your doctor dated Date G, 2007, indicated that you were being treated for a pre- existing medical condition during the period that included the 60-day rollover period, and that added stress aggravated this condition.

Based on the facts and representations, you request that the Internal Revenue Service waive the 60 day rollover requirement with respect to your contribution of Amount H into an IRA because the failure to waive such requirement would be against equity or good conscience.

With respect to your ruling request, 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)).

200740017

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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.

Rev. Proc. 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 you presented, and the documentation submitted on your behalf, demonstrate that you intended to accomplish the rollover of Amount H, and your failure to do so was due to effects Hurricane Katrina had on your family and relatives which aggravated a pre-existing medical condition and rendered you incapable of handling your financial affairs in an appropriate manner until your family was safe.

Accordingly, 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 H from IRA X. You are granted a period not to exceed 60 days as measured from the issuance of this ruling letter to contribute Amount H into a Rollover IRA. Provided all other requirements of section 408(d)(3) of the Code (except the 60-day requirement) are met with respect to Amount H, the contribution of Amount H 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 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.

200740017

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

If you wish to inquire about this ruling, please contact (ID ) at ( )
. Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

Frances V. Sloan, Manager,
Employee Plans Technical Group 3

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