PLR 1036026: IRS waived the 60-day IRA rollover deadline after a spouse's death and mental decline

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer to roll an IRA distribution into another IRA. The taxpayer had intended to move the funds to a new financial institution but deposited them into a non-IRA certificate of deposit after confusion caused by her spouse's death and her declining mental faculties. The IRS found that the funds remained untouched and granted 60 days from the ruling date to make a rollover contribution equal to the distributed amount. The ruling does not authorize rollover of amounts required to be distributed under the specified provisions.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover requirement?
• Outcome: Approved
• Key authorities: IRC §§ 401, 408, and 6110

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 2 Ol 03 6 02 6

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

JUN 17 2010

Uniform Issue List: 408.03-00

SE: T: EP: RACTI

Legend:

Taxpayer A

Financial Institution B
Financial Institution C
Account D

IRA X
Amount 1

Dear XXXXX:

This letter is in response to a request for a letter ruling dated November 22, 2009, as
supplemented by correspondence dated February 23, 2010, as submitted 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:

Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3) of the Code was due to her confusion regarding her

financial affairs resulting from the recent death of her spouse and her ongoing mental
condition.

Taxpayer A, age 79 at the time of the events described below, represents that she was
the owner of a qualified individual retirement arrangement (IRA X), established and
maintained at Financial Institution B under the rules of section 408 of the Code.
Taxpayer A represents that she wanted to change investments and requested the
distribution of her “Flexible Savings Certificate” from Financial institution B.

On November 8, 20. _, she received a distribution totaling Amount 1 from IRA X with the
intent of depositing the funds at Financial Institution C. On November 28, 20°,

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Taxpayer A deposited Amount 1 in Account D, a non-IRA certificate of deposit at
Financial Institution C.

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Taxpayer A represents that her deceased husband had previously handled all of the
couple’s financial affairs and she was new to handling the finances. In addition,
Taxpayer A’s son was deployed to Iraq during this time, adding to her ongoing stress, |
anxiety, and mental anguish.

Taxpayer A represents that, as a result of her mental condition, she did not understand
the consequences of removing the funds from her IRA and failing to re-deposit them
within sixty (60) days into another IRA. Taxpayer A further represents that Amount 1
remains in Account D at Financial Institution C and has not been used for any purpose.

Documentation submitted with Taxpayer A’s request shows that for the duration of the
60-day period after which Amount 1 was distributed and thereafter, Taxpayer A was in
declining mental faculties, confused about her financial affairs and was incapable of
making sound decisions pertaining to her finances. Taxpayer A’s son is now handling
her finances.

Based on the above facts and representations, you request 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 the distribution of Amount 1.

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)).

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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.

The information presented and the documentation submitted by Taxpayer A is
consistent with her assertion that her failure to accomplish a timely rollover of Amount 1
was due to her confusion regarding her financial affairs resulting from the recent death
of her spouse and her ongoing mental condition.

Therefore, pursuant to section 408(d)(3)(1) of the Code, the Service hereby waives the
60-day rollover requirement with respect to the distribution of Amount 1 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 1 to an IRA (or IRAs) described in section 408(a) of the Code.
Provided all other requirements of section 408(d)(3) of the Code, 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 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.

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This ruling does not authorize the rollover of amounts that are required to be distributed
by sections 408(a)(6) and 401(a)(9) of the Code.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being
sent to your authorized representative.

If you wish to inquire about this ruling, please contact Mr. XXXXXX XXXXXXX
(Government Identification 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

cc: