PLR 200840046: Medical incapacity supports waiver of IRA rollover deadline

Plain-English summary

A 79-year-old taxpayer withdrew an amount from an IRA and intended to roll it back into an IRA within 60 days. The taxpayer also received a separate required minimum distribution and had sufficient funds throughout the rollover period. Medical documentation showed severe chronic conditions and treatment that left the taxpayer effectively disabled and unable to manage financial affairs appropriately. The IRS found that the incapacity justified relief and waived the 60-day rollover deadline. It granted 60 days from the ruling date to complete the rollover, while expressly excluding any required minimum distribution from the relief.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover deadline because medical incapacity prevented the taxpayer from managing the rollover?
• Outcome: Approved. The taxpayer received 60 days from the ruling date to complete the rollover.
• Key authorities: IRC §§ 72, 401(a)(9), 408(d); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES '
DIVISION

Uniform Issue List: 408.03-00

DEC 2 2 2006
T:EP:RA:T3

Legend:

Company A

Amount D

Amount E

Date M

Date N

Account W

IRA X =

Dear:

This is in response to your request dated April 5, 2006 as supplemented by correspondence dated November 7, 2006, and December 14, 2006, 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’”).

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

You are 79 years old and maintain IRA X with Company A. 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 mental and physical incapacities which impaired your ability to handle your financial affairs, including the rollover of Amount D.

On Date M, 2006 you withdrew Amount D from IRA X. You also received the required minimum distribution of Amount E. You intended to roll Amount D back into an IRA within the 60 days. Medical documentation submitted with your request indicates the severity of your chronic medical problems and the extent of your treatment for these conditions. At all times during the 60-day period, you had sufficient funds to complete the rollover.

Based on the facts and representations, you request a ruling that the Internal Revenue Service waive the 60-day rollover requirement, with respect to Amount D, contained in section 408(d)(3) of the Code in this instance.

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

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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 were effectively disabled and incapable of handling your financial affairs in an appropriate manner.

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 D from IRA X. You are granted a period of 60 days from the issuance of this ruling letter to contribute Amount D, 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 such contribution, Amount D will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

This ruling does not authorize the rollover of amounts that are required to be distributed by section 401(a)(9) 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.

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If you wish to inquire about this ruling, please contact *** (ID -*) at ()
-*. Please address all correspondence to SE:T:EP:RA:T:3

Sincerely yours,

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

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose