PLR 1044036: IRS waived the 60-day IRA rollover deadline after the taxpayer's death

Plain-English summary

The estate of a taxpayer requested a waiver of the 60-day deadline for rolling over a distribution from a SIMPLE IRA. The taxpayer had received checks and intended to complete a rollover, but died before doing so, and the surviving spouse could not establish an IRA that would accept the checks before the deadline. The IRS found that the taxpayer intended to make the rollover, that the distributed amount had not been used for another purpose, and that the failure was caused by the taxpayer's death. The IRS waived the deadline and gave the surviving spouse 60 days from the ruling date to contribute the amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement when the taxpayer dies before completing an intended IRA rollover?
• Outcome: Approved
• Key authorities: IRC §§ 72, 401, 408, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

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

201044036

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00 AUG 11 2010

XXXXXXXXXXXXXX
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SE:T:EP:RA:T2

Legend:

Taxpayer A = XXXXXXXXXXXXXX

Taxpayer B = XXXXXXXXXXXXXX

Amount C = XXXXXXXXXXXXXX

Date 1 = XXXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXXX
Date 3 = XXXXXXXXXXXXXX
Date 4 = XXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

XXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXX:

This is in response to your request dated December 18, 2009, submitted on
behalf of the estate of Taxpayer A, by your authorized representative, in which you, as
the personal representative of the estate of Taxpayer A, 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 50, was the owner of IRA X, a Savings Incentive Match Plan for
Employees (SIMPLE ) IRA. Taxpayer A received a distribution totaling Amount C from
IRA X. Taxpayer A died on Date 2. Taxpayer B asserts that the failure to accomplish a
rollover of Amount C within the 60-day period prescribed by section 408(d)(3) of the
Code was due to Taxpayer A’s death.

Taxpayer B represents that pursuant to the termination of IRA X on Date 1,
Taxpayer A received three checks from IRA X totaling Amount C. Taxpayer A intended
to roll over Amount C into a new traditional IRA account with a different custodian; but
died on Date 2, before he was able to complete the rollover. On Date 3, Taxpayer B
discovered the uncashed checks on Taxpayer A’s desk and attempted to establish an
IRA prior to Date 4, the expiration of the 60-day rollover period; but no financial
institution would accept them.

Taxpayer B has submitted a certified copy of the will naming Taxpayer B as
personal representative of Taxpayer A’s estate. Because Taxpayer A was unable to
complete the rollover due to his death, Taxpayer B, as surviving spouse and sole
beneficiary, has requested a waiver of the 60-day rollover requirement to rollover the
proceeds from IRA X into an IRA account set up and maintained in her name as
spousal beneficiary.

Documentation has been submitted that reveals that Taxpayer A intended to roll
over Amount C within 60 days of Date 1, the date of distribution. Amount C has not
been used for any other purpose.

Based on the facts and representations, you request a ruling that the Internal
Revenue Service waive the 60-day rollover requirement with respect to the distribution
of Amount C from IRA X.

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

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(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)(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)(C)(i) of the Code provides, in summary, that the rollover rules
of Code section 408(d)(3) do not apply to inherited IRAs.

Section 408(d)(3)(C)(ii) of the Code provides that the term "inherited IRA"
means an IRA obtained by an individual, other than the IRA owner’s spouse, as a result
of the death of the IRA owner. Thus, in short, under circumstances that conform with the
requirements of Code section 408(d)(3), a surviving spouse who acquires a decedent’s
IRA after, and as a result of, the death of an IRA owner will be able to roll over the
decedent’s IRA into an IRA set up and maintained in the name of the surviving spouse.

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) 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 (for
example, in the case of payment by check, whether the check was cashed); and (4) the
time elapsed since the distribution occurred.

The Preamble to the “Final” Income Tax Regulations under section 401(a)(9) of
the Code provides, in relevant part, that a surviving spouse may elect to treat an IRA of

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his/her deceased spouse as his/her own if the surviving spouse is the sole beneficiary
of the IRA with an unlimited right to withdraw from the IRA. A surviving spouse may not
elect to treat an IRA as his/her own if a trust is the beneficiary of the IRA. However, a
surviving spouse maybe eligible to roll over a distribution from an IRA of a decedent if
the spouse actually receives the distribution regardless of whether the spouse is the
sole beneficiary of the IRA (See Preamble at 67 Federal Register 18992-18993 (April
17, 2002)).

The information presented and the documentation you submitted is consistent
with your assertion that the failure to accomplish a timely rollover was due to the death
of Taxpayer A.

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 C from
IRA X. Taxpayer B is granted a period of 60 days from the issuance of this ruling letter
to contribute Amount C 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 C will be considered a rollover contribution within the meaning of
section 408(d)(3) of the Code.

The Service notes that the rollover IRA into which Amount C will be contributed,
will not have a “designated beneficiary” as that term is defined in Code section
401(a)(9). Thus, the Code section 401(a)(9) distribution period with respect to the
rollover IRA will be that applicable to an IRA owner who had reached his required
beginning date and died without designating a beneficiary of his IRA.

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.

5

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XXXXXXXXXXXXX

If you wish to inquire about this ruling, please contact XXXXXXXXXXXXX (ID XX-
XXXXX) at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely,

Donzell Littlejohn

Donzell Littlejohn, Manager
Employee Plans Technical Group 2

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