PLR 1043049: IRS waived the 60-day IRA rollover deadline because of the taxpayer's medical condition

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 experienced strokes and other serious medical conditions that impaired the ability to manage financial affairs during the rollover period. The IRS found that the submitted information and documentation supported the medical explanation and that the distributed amount had not been used for another purpose. It waived the 60-day requirement under IRC § 408(d)(3)(I), subject to the other rollover requirements. The amount transferred into the receiving IRA would therefore be treated as a rollover contribution.

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because the taxpayer's medical condition impaired the ability to complete the rollover on time?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3)(A), 408(d)(3)(D), 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

August 4, 2010

Uniform Issue List: 408.03-00

Legend:

Taxpayer A =

IRA X =

Amount C =

Amount D =

IRA Z =

Date 1 =

Date 2 =

Date 3 =

Date 4 =

Dear:

This is in response to a letter dated [illegible] submitted on your behalf by your authorized representative, as supplemented by correspondence dated [illegible] and [illegible] 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 [illegible], represents that his failure to accomplish a rollover of Amount D within the 60-day period prescribed by section 408(d)(3) was due to his medical condition that impaired his ability to handle his financial affairs during the 60-day rollover period. Taxpayer A also represents that Amount D has not been used for any other purpose.

During 2008, Taxpayer A suffered from a series of strokes as well as from other serious medical conditions. On Date 1, Taxpayer A was admitted to the hospital. As a result of his worsening medical condition, Taxpayer A suffered memory loss and his ability to conduct his financial affairs was impaired. He was released from the hospital on Date 2. On Date 3, while Taxpayer A was still mentally and physically impaired, he received a distribution of Amount C from IRA X. Taxpayer A's authorized representative asserts that Taxpayer A intended at that time to roll over Amount D to another IRA and use the remainder of the distribution for his medical expenses. However, medical documentation shows that, both immediately after the distribution was made and throughout the 60-day period following that event, Taxpayer A's ability to conduct his financial affairs was impaired. In March 20[illegible], Taxpayer A's financial advisor made Taxpayer A aware of his failure to roll over Amount D and, on Date 4, Amount D was rolled over into IRA Z.

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 Amount D.

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 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.

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 caused by his medical condition, which impaired his ability to handle his financial affairs during the 60-day rollover period.

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 D from IRA X. 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 D, which was contributed to IRA Z, will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

This ruling does not authorize the rollover of amounts that are required to be distributed by section 401(a)(9) 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.

If you wish to inquire about this ruling, please contact [illegible] (ID # [illegible]) at ([illegible]). Please address all correspondence to

Sincerely yours,

[illegible]

for

Manager,
Employee Plans Technical Group 4

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

CC: