PLR 201020026: IRS waived the 60-day IRA rollover deadline because of the taxpayer's medical condition

Plain-English summary

The IRS waived the 60-day deadline for rolling a distribution from one IRA into a rollover IRA. The taxpayer said that declining health, mental confusion, and memory impairment prevented timely completion of the rollover and impaired the ability to manage financial affairs. The taxpayer intended to roll over the amount remaining after tax withholding and represented that it had not been used for another purpose. Under IRC § 408(d)(3)(I), the IRS granted 60 days from the ruling letter to make the contribution, subject to the other rollover requirements. The ruling did not authorize a rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because the taxpayer's medical condition prevented a timely rollover?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), 408(d)(3)(I), 401(a)(9), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

201020026

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 22 2010

Uniform Issue List: 408.03-00

Legend:

Taxpayer =

Account A =

Financial Institution B =

Financial Institution C =

Financial Institution D =

Account E =

Financial Institution F =

Amount 1 =

Amount 2 =

Amount 3 =

Dear :

This is in response to your submission dated October 6, 2009, as modified and supplemented by additional correspondence dated November 8, November 11 and November 15, 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”).

Taxpayer asserts that the failure to accomplish the rollover within the 60-day period described by section 408(d)(3) of the Code was due to his mental and physical condition which affected his memory and impaired his ability to manage his financial affairs.

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

Taxpayer was age _, at the time of the distribution of Amount 1 from Account A, an individual retirement arrangement (“IRA”) established and maintained at Financial Institution B.

Taxpayer asserts that on October , 20 , he received a distribution of Amount 1 from Account A which he then deposited into his account at Financial Institution C over concern that the funds would be lost if Financial Institution B failed. Taxpayer moved the funds without consulting his spouse, as he normally did. On October , 20 , he deposited Amount 2 (Amount 1 minus withheld Federal and state taxes) into Account E at Financial Institution D. Taxpayer further asserts that he subsequently transferred a portion of Amount 2 (Amount 3) to Financial Institution F while awaiting the Service's decision regarding his submission. Taxpayer asserts that he intended to rollover Amount 2 and believed that he was depositing Amount 2 into another IRA account. Taxpayer represents that he has not used Amount 2 for any other purpose.

Taxpayer suffers from numerous health issues and has been in declining health for several years. Medical documentation and statements from Taxpayer's spouse submitted with Taxpayer's request demonstrate the severity of his medical problems and the extent of his treatment for these conditions. According to the submitted documentation, Taxpayer's health issues have caused Taxpayer to suffer lack of energy, mental confusion and memory impairment. The documentation also shows that Taxpayer's ability to adequately manage his financial affairs has become increasingly difficult because of his health conditions, and that during the time leading up to and following Taxpayer's withdrawal from Account A, Taxpayer suffered from mental confusion and memory impairment. Taxpayer's primary care physician has confirmed in a letter dated June , 20 , that Taxpayer, because of his mental and physical state, was not competent to make financial decisions.

Based on the above facts and representations, Taxpayer requests a ruling that the Internal Revenue Service (“Service”) waive the 60-day rollover requirement contained in section 408(d)(3) of the Code with respect to Amount 2 of the distribution from Account 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.

201020026

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)(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.

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.

201020026
-4-

Section 401(a)(9) of the Code provides the rules for required minimum distributions from a qualified plan. Section 401(a)(9)(A) provides, in pertinent part, that a trust shall not constitute a qualified trust unless the plan provides that the entire interest of each employee will be distributed or commence to be distributed to such employee not later than the required beginning date. Section 401(a)(9)(C) defines the term “required beginning date” as April 1 of the calendar year following the later of the calendar year in which the employee attains age 70½, or the calendar year in which the employee retires.

The information presented and documentation submitted by Taxpayer's physicians is consistent with Taxpayer's assertion that his failure to accomplish a timely rollover was due to medical conditions which impaired his ability to manage his financial affairs.

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 2 from Account A. Taxpayer is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 2 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 2 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 Code section 401(a)(9).

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.

If you wish to inquire about this ruling, please contact (Government I.D. Number xx-xxxxx) by phone at (xxx) xxx-xxxx or by fax at (xxx) xxx-xxxx. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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