PLR 1025084: IRS waived the 60-day IRA rollover requirement after medical and family hardships

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer who withdrew money from an IRA but did not complete a rollover while dealing with a worsening medical condition and a family emergency. Part of the money was placed in a non-IRA certificate of deposit, and the rest was kept as cash, with none used for another purpose. The IRS granted 60 days from the issuance of the ruling letter to contribute the amount to a rollover IRA, provided the other rollover requirements were met. The waiver was issued under IRC § 408(d)(3)(I), which allows relief when enforcing the deadline would be against equity or good conscience.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because medical and family hardships prevented a timely rollover?
• Outcome: approved
• Key authorities: IRC §§ 72, 408(d)(1), 408(d)(3), and 408(d)(3)(I); Rev. Proc. 2003-16; IRC § 6110(k)(3)

Full text (IRS public release)

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

201025084

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAR 30 2010

UIL No. 408.03-00

[illegible routing notation]

Legend:

Taxpayer A =

Credit Union K =

Individual H =

Amount A =

Amount B =

Amount C =

IRA X =

Date 1 =

Date 2 =

Date 3 =
Date 4 =

Date 5 =

Dear :

This is in response to your request dated , as supplemented by
correspondence dated and , 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”).

Page 2 of 4

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

Taxpayer A, age 50, represents that she requested a withdrawal from IRA X
totaling Amount A. Taxpayer A asserts that her failure to accomplish a rollover within
the 60-day period prescribed by section 408(d)(3) was due to Taxpayer A's medical
condition, which impaired her ability to handle her financial affairs. Taxpayer A further
represents that Amount A has not been used for any other purpose.

On Date 1, Taxpayer A requested a complete withdrawal from IRA X totaling
Amount A. Taxpayer A received Amount A on Date 2. On Date 3, Taxpayer A
deposited Amount B in a non-IRA certificate of deposit held by Credit Union K and
retained Amount C in cash at her home. Amount B and Amount C total Amount A.
Documentation shows that Taxpayer A suffers from a worsening medical condition
which causes her to experience problems with her memory and impaired her ability to
handle her financial affairs. The Form 1099-R issued to Taxpayer A shows that Amount
A was distributed due to disability.

On Date 4, five days prior to Taxpayer A's withdrawal of Amount A from IRA X,
Taxpayer A’s mother-in-law was diagnosed with a life-threatening disease. On Date 5,
five days after Taxpayer A deposited the withdrawn funds into a non-IRA certificate of
deposit, Taxpayer A’s mother-in-law unexpectedly died. As a result of her own medical
condition and the disruption to her family caused by the illness, hospitalization and
sudden death of her mother-in-law during the 60-day rollover period, Taxpayer A did not
inform her husband of the withdrawal she requested on Date 1 and she did not
remember that she had withdrawn Amount A from IRA X. Taxpayer A’s husband,
Individual H, also distracted by his mother’s illness and sudden death, did not become
aware that Taxpayer A had withdrawn Amount A from IRA X until he was notified by a
tax preparer months after the 60-day rollover period had expired.

Based on the facts and representations, you request a ruling that the Internal
Revenue Service (the “Service”) waive the 60 day rollover requirement with respect to
the distribution of 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

Page 3 of 4

(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)(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), 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 her assertion that her failure to accomplish a timely rollover was caused
by her medical condition, which impaired her ability to handle her 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 A
from IRA X. Taxpayer A is 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.

Page 4 of 4

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 (ID
at . Please address all correspondence to

Sincerely yours,

[handwritten signature] for Ada Perry
Laura B. Warshawsky, Manager
Employee Plans Technical Group 4

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