PLR 201016097: 60-day rollover period waived because of a debilitating mental condition

Plain-English summary

The IRS waived the 60-day rollover deadline for an 82-year-old taxpayer who received a distribution from a Roth IRA and inadvertently placed it in a non-Roth IRA. The taxpayer provided documentation supporting a debilitating mental condition that impaired memory and the ability to conduct financial transactions. The taxpayer had not used the distributed amount for another purpose, and the account was later retitled as a Roth IRA. The IRS granted 60 days from the ruling date to contribute an equal amount to an eligible IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement for the distribution from the taxpayer's Roth IRA?
• Outcome: approved
• Key authorities: IRC §§ 408(d)(3), 408(d)(3)(I), and 408A(e)

Full text (IRS public release)

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

201016097

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 27 2010

Uniform Issue List: 408.03-00

S.E.T.EP. R.A. T3

Legend:
Taxpayer A:
IRA X:
Financial Institution M:
Date 1:
Date 2:

Account Y:
Title Y-2:

Financial Institution W:

Amount M:

Dear :

This is in response to your letters dated January 30, 2009, June 1, 2009, and September 22, 2009, 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").

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested.
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Taxpayer A maintained a Roth Individual Retirement Account (IRA), IRA X, with Financial Institution M. Taxpayer A, age 82, asserts that on Date 1, Taxpayer A received a distribution of Amount M from IRA X and that his failure to accomplish a rollover of Amount M within the 60 day period prescribed by section 408(d)(3) of the Code was due to a mental condition which adversely affected his ability to conduct financial transactions.

On Date 1 Taxpayer A, intending to protect his investment in IRA X, inadvertently deposited Amount M into a non-Roth IRA, Account Y at Financial Institution W. This transaction was discovered on Date 2 by Taxpayer A’s accountant. Taxpayer A’s accountant subsequently arranged for the creation of a Roth IRA account at Financial Institution W, by the re-titling of Account Y to Title Y-2.

Taxpayer A represents that he suffers from a condition which impairs his memory. On Date 1, Taxpayer A opened Account Y, a non-Roth account, despite his intent to maintain the distribution of Amount M from IRA X as a Roth IRA. Taxpayer A has submitted documentation which supports his claim of a debilitating mental condition. Taxpayer A has not used Amount M for any other purpose.

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 M contained in section 408(d)(3) of the Code ("the Code").

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)(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)(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
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(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)(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.

Section 408A(e)(6) of the Code provides that no rollover contribution may be made to a Roth IRA unless it is a qualified rollover contribution.

Section 408A(e) provides that the term “qualified rollover contribution” means a rollover contribution to a Roth IRA from another such account, or from an individual retirement plan, but only if such rollover contribution meets the requirements of section 408(d)(3).

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
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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 and documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish a rollover of Amount M within the 60 day period prescribed by section 408(d)(3) of the Code was due to a mental condition which adversely affected his ability to conduct financial transactions.

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 M from IRA X. Pursuant to this ruling letter, Taxpayer A is granted a period of 60 days measured from the date of the issuance of this letter ruling to make a rollover contribution of an amount equal to Amount M to an IRA (or IRAs) described in Code section 408(a). Provided all other requirements of Code section 408(d)(3), except the 60-day requirement, are met with respect to such IRA contribution, the contribution will be considered a rollover contribution within the meaning of Code section 408(d)(3).

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.

A copy of this letter ruling is sent to your authorized representative pursuant to the provisions of a Power of Attorney on file in this office.
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If you have any questions, please contact by
phone at
.

Sincerely yours,

Frances V. Sloan

Frances V. Sloan, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose