PLR 201025085: IRS waived the 60-day IRA rollover requirement after a medical delay

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer who withdrew money from an IRA and deposited it into a non-IRA savings account while intending to complete a rollover. The taxpayer said a medical condition impaired the ability to complete the rollover, and the financial institution refused the attempted rollover because the deadline had passed by one day. 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 a medical condition delayed the taxpayer's 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)

201025085

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAR 30 2010

UIL No. 408.03-00

[illegible routing notation]

Legend:
Taxpayer A =
IRA X
=
Financial Institution B =
Amount A =
Account C =
Date 1 =
Date 2 =
Date 3 =

Dear
:

This is in response to your letter dated
, supplemented by letters
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”).

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

Taxpayer A, age 64, represents that, on Date 1, concerned by the decline in the stock market, he requested a withdrawal of Amount A from IRA X. Taxpayer A received Amount A on Date 2. Taxpayer A represents that he intended to rollover the withdrawn funds into another IRA. On Date 2, Taxpayer A deposited Amount A with Financial Institution B in Account C, a non-IRA savings

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account, intending to transfer Amount A into an IRA within the 60-day period. Taxpayer A asserts that his 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 his medical condition which impaired his ability to accomplish a timely rollover.

Taxpayer A represents that he was suffering from an illness during the last few days of the 60-day period and attempted to complete the rollover on Date 3 but employees of Financial Institution B refused his request to do so, informing him that he had exceeded the 60-day period by one day. Amount A currently remains in Account C.

Based on these 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:

(i) the entire amount received (including money and 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).

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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 his assertion that his failure to accomplish a timely rollover was due to his medical condition, which impaired his ability to accomplish a timely rollover.

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.

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.

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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