PLR 1043045: IRS waived the 60-day IRA rollover deadline after a taxpayer's caregiving-related mental strain

Plain-English summary

The IRS considered a request to waive the 60-day deadline for rolling part of an IRA distribution into another IRA. The taxpayer intended to move the funds to an IRA but instead deposited them into a non-retirement taxable account. The taxpayer said that mental strain associated with serving as the primary caregiver for a wife undergoing cancer treatment impaired his ability to handle the transaction. The IRS accepted the submitted facts and documentation and waived the deadline under IRC § 408(d)(3)(I). It gave the taxpayer 60 days from the ruling letter to contribute the amount to an IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement when the taxpayer's mental condition and caregiving responsibilities led to a deposit into a non-IRA account?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(1), 408(d)(3)(A), 408(d)(3)(B), 408(d)(3)(D), 408(d)(3)(E), 408(d)(3)(I), 401(a)(9), and 6110(k)(3); IRC § 72; Rev. Proc. 2003-16

Full text (IRS public release)

Department of the Treasury

Internal Revenue Service

Washington, D.C. 20224

Tax Exempt and
Government Entities
Division

Uniform Issue List: 408.03-00

August 4, 2010

XXXXX

Legend:

Taxpayer A = XXXXX

Bank M = XXXXXX

Bank N = XXXXX

IRA X = XXXXX

Account F = XXXXX

Amount S = XXXXX

Amount T = XXXXX

Amount U = XXXXX

Date 1 = XXXXX

Date 2 = XXXXXX

Dear XXXXX:

This is in response to your letter dated XXXXX, as supplemented by additional correspondence dated XXXXX and XXXXX, submitted on your behalf by your authorized representative, in which you requested 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 your ruling request.

Taxpayer A, age [illegible], represents that he received a distribution from IRA X totaling Amount S. Taxpayer A asserts that his failure to accomplish a rollover of Amount U (Amount S, Taxpayer A's account balance less Amount T, Taxpayer A's required minimum distribution for year 2008) within the 60-day period prescribed by section 408(d)(3) of the Code was due his mental condition which impaired his ability to handle his financial matters, which caused him to place Amount S into a non-IRA account. Taxpayer A represents that Amount U has not been used for any other purpose.

Taxpayer A maintained IRA X with Bank M until Date 1. On Date 2, documentation was completed by Taxpayer A, to transfer Amount S from IRA X into Account F with Bank N. Taxpayer A withdrew Amount S from Bank M, and deposited the funds into Bank N because Taxpayer A believed that Bank M was having financial difficulties. Taxpayer A deposited Amount S into a non-retirement taxable account, Account F instead of an IRA as he had intended.

Around the time Taxpayer A received the distribution of Amount S from IRA X, he was the primary caregiver for his wife, who had just been diagnosed with cancer, and told that she had four to six weeks to live. Taxpayer A had to provide attention and transportation for his wife for her frequent chemotherapy treatments. The emotional stress of caring for his wife caused Taxpayer A to remain unaware that he had placed Amount S into an unqualified money market account, instead of an IRA. On a later date, Taxpayer A was notified of the error while having his tax return prepared by his accountant. Until that time, Taxpayer A believed that he had completed a transfer to a rollover IRA of Amount S.

Based upon the above facts and representations, you request that the Internal Revenue Service waive the 60-day rollover requirement contained in section 408(d)(3) of the Code with respect to the distribution of Amount U.

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 to whose benefit the account 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 he 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 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.

Revenue Procedure 2003-16, 2003-4 I.R.B. 359, provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to section 408(d)(3)(I) of the Code, 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; and, (4) the time elapsed since the distribution occurred.

The information and documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish the rollover within the 60-day period prescribed by Section 408(d)(3) of the Code was due to his mental state associated with acting has his wife's primary caregiver during her diagnosis and treatment of colorectal cancer, which led to Amount U being placed in a non-IRA account.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the IRS hereby waives the 60-day rollover requirement with respect to the distribution of Amount U. Taxpayer A is granted 60 days from the issuance of this ruling letter to contribute Amount U into an IRA. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day rollover requirement, are met with respect to such contribution, Amount U will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

Please note that, pursuant to section 408(d)(3)(E) of the Code, this ruling does not authorize the rollover of Code section 401(a)(9) minimum required distributions.

No opinion expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the Code or regulations that may be applicable hereto.

This ruling is directed solely 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 have any questions regarding this ruling, please contact XXXXX, XXXXXX, I.D. No. XXXXX, at XXXXX.

Sincerely yours,

[illegible]

Donzell H. Littlejohn, Manager

Employee Plans Technical Group 2

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclosure

CC:
XXXXX