PLR 200905037: Disability and caregiving demands justified a late IRA rollover

Plain-English summary

A 69-year-old IRA owner received a stock certificate when the financial institution distributed stock from the IRA without the owner's request or consent. The owner mistakenly believed the stock would remain in the IRA as long as it was not sold. The owner's disability and the illness and hospitalization of the owner's mother, for whom the owner was the primary caregiver, impaired the owner's ability to understand the distribution and complete a timely rollover. The stock was not used for another purpose, and the owner intended to preserve it for retirement. The IRS found that the medical circumstances caused the missed deadline and granted 60 days from the ruling date to contribute the stock's stated value to a rollover IRA.

Ruling snapshot

• Question: Could an IRA owner receive a waiver of the 60-day rollover deadline after disability and caregiving demands prevented a timely rollover of distributed stock?
• Outcome: Approved, with 60 days from the ruling date to complete the rollover
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

200905037

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

NOV 7 2008

SE:T:EP:RA:T3

Legend:

IRA X =

Amount A =

Financial Institution A =

Dear :

This is in response to your request dated June 15, 2008, as supplemented by correspondence dated August 21, 2008, 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).

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

You are 69 years old. You had an Individual Retirement Arrangement (IRA), IRA X, which was maintained with Financial Institution A. You represent that you received a distribution of a stock certificate from IRA X with a value of Amount A. You assert that your failure to accomplish a rollover of Amount A within the 60-day period prescribed by section 408(d)(3) of the Code was due to your medical condition and the medical condition of your mother which impaired your ability to understand the consequences of receiving the stock certificate and to accomplish a timely rollover. You further represent that Amount A has not been used for any other purpose.

You received a letter from Financial Institution A, dated August 27, 2007, which explained that the stock held in IRA X was being distributed to you. This letter included the stock certificate. You did not request nor consent to this distribution. You thought that as long as you did not sell this stock, it would continue to be an IRA. Your intent was to keep Amount A in an IRA to provide for your future retirement needs.

You have provided documentation that you are disabled. In addition, you have represented that you are the primary caregiver for your mother, who has been hospitalized or in a nursing home since May 2007.

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200905037

Based on the facts and representations, you request a ruling that the Internal Revenue Service waive the 60-day rollover requirement with respect to the distribution of Amount A 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 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)(I) of the Code provides that the Secretary may waive the 60-day requirement under sections 408(d)(3)(A) 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) of the Code, 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 and documentation you submitted is consistent with your assertion that your failure to accomplish a timely rollover was caused by your illness

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and your mother’s illness and hospitalization.

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 A from IRA X. You are granted a period of 60 days from the issuance of this ruling letter to contribute Amount A 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 A 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 expresses no opinion as to whether the IRA described herein satisfied the requirements of section 408 of the Code.

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 , I.D. # , at . Please address all correspondence to SE:T:EP:RA:T.

Sincerely yours,

, Manager
Employee Plans Technical Group

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