PLR 201007079: IRS waives the 60-day IRA rollover requirement after medical conditions impaired the taxpayer's decision-making ability

Plain-English summary

The taxpayer, age 72, received a distribution from an IRA and used the funds to purchase annuities in a non-IRA account. The taxpayer said that mental and medical conditions impaired decision-making and the ability to manage financial affairs during the 60-day rollover period. Medical documentation showed a diagnosed disease affecting those abilities, and the taxpayer represented that the amount had not been used for another purpose. The IRS waived the 60-day requirement under IRC § 408(d)(3)(I) and granted 60 days from the ruling date to contribute the eligible amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: May the IRS waive the 60-day IRA rollover requirement when medical conditions impaired the taxpayer's ability to complete a timely rollover?
• Outcome: Approved, waiver granted
• Key authorities: IRC §§ 408(d)(1), 408(d)(3)(A), (B), (D), (E), and (I); IRC § 72; Rev. Proc. 2003-16

Full text (IRS public release)

201007079

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 24 2009
SE:T:EP:RA:T3

Uniform Issue List: 408.03-00

Legend:

IRA X =
Amount A =
Amount B =
Date 1 =
Date 2 =
Company A =
Company B =

Dear:

This is in response to a request submitted on your behalf by your authorized
representative dated June 2, 2009, as supplemented by correspondence dated September
25, 2009, and October 5, 2009, 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 72 years old. You had an Individual Retirement Arrangement (IRA), IRA X,
maintained by Company A. You represent that Amount A was distributed on Date 1.

You assert that your failure to accomplish a rollover of Amount A (an amount less than
Amount B) within the 60-day rollover period prescribed by section 408 (d) (3) of the
Code was due to your mental and medical conditions which impaired your decision

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making ability and impaired your ability to manage your financial affairs during the 60-
day rollover period. You seek a ruling waiving the 60-day period to roll over Amount A.
You assert that Amount A has not been used for any other purpose.

You assert that you withdrew Amount A from Company A on Date 1 because you were
not satisfied with the investment performance of IRA X. On Date 2, you purchased
annuities from Company B in the amount of Amount B. You explain that these annuities
were placed into a non-IRA account. You state that you had no knowledge or
understanding of the income tax consequences of these transactions.

You have submitted documentation from your neurologist that reflects that you have been
formally diagnosed with a disease which impaired your decision making and cognitive
abilities during the period in question.

Based on the facts and representations stated above you request a ruling that the Internal
Revenue Service waive the 60-day rollover requirement contained in section 408 (d) (3)
of the Code regarding Amount A.

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) (E) of the Code provides that the rollover provisions of section
408 (d) do not apply to any amount required to be distributed under section 408 (a) (6).

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) 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 mental and
medical conditions which impaired your decision making ability and impaired your
ability to manage your financial affairs during the 60-day rollover period.

Therefore, pursuant to section 408 (d) (3) (I) of the Code, the Service hereby waives the
60-day rollover requirement with respect to distributions totaling Amount A (less
amounts described below) from IRA X. You are granted a period of 60 days from the
issuance of this letter ruling to contribute Amount A (less amounts described below) 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 (less
amounts described below) 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 IRA X satisfied the
requirements of section 408 of the Code.

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Section 408 (d) (3) (E) of the Code provides that the rollover provisions of section
408 (d) do not apply to any amount required to be distributed under section 408 (a) (6).

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.

Pursuant to 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
address all correspondence to SE:T:EP:RA:T3.

Sincerely,

Frances V. Sloan, Manager
Employee Plans Technical Group 3

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

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