PLR 1028047: The IRS waived the 60-day rollover deadline because of a medical condition

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who had withdrawn funds from an IRA but did not complete the rollover on time because a medical condition impaired her ability to handle her financial affairs. The taxpayer represented that the distributed amount had not been used for another purpose. The IRS granted 60 days from the ruling date to contribute the amount to a rollover IRA, provided the other rollover requirements were met. This ruling applies only to the specific taxpayer and facts described.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover requirement under IRC § 408(d)(3)(I)?
• Outcome: approved, subject to satisfying the other rollover requirements
• Key authorities: IRC §§ 72, 408(d)(1), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

COMMISSIONER
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

APR 2 2 2010

UIL No. 408.03-00

SE:T:EP:RA:T4

Legend:

Taxpayer A
Amount A =
Amount B =
Amount C =
IRA X =
Account Y =
Date 1 =
Date 2 =
Date 3 =

Date 4 =

Dear

This is in response to your request dated , as supplemented by
correspondence dated 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, age 61, 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, by telephone, a complete withdrawal from IRA
X totaling Amount A. On Date 2, the settled proceeds from IRA X, totaling Amount B,
were deposited by electronic transfer into Account Y, a taxable checking account. On
Date 3, proceeds from the sale of stock held in IRA X, totaling Amount C, also were
deposited into Account Y. Amounts B and C combined equal Amount A.
Documentation shows that, during the entirety of the 60-day rollover period, Taxpayer A
suffered from a medical condition that compromised her ability to handle her financial
affairs. Taxpayer A’s husband first discovered the withdrawal of Amount A when he
began collecting the couple’s personal tax documents on Date 4, 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

(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

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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 due to
Taxpayer A’s 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.

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 has been sent to your authorized representative
pursuant to a power of attorney on file in this office.

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If you wish to inquire about this ruling, please contact (ID No. ) at
( ) . Please address all correspondence to SE:T:EP:RA:T4.

Sincerely yours,

A fel P
cv Laura B. Warshawsky, Manager
Employee Plans Technical Group 4

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

CC: