PLR 201141022: IRS waives the 60-day IRA rollover deadline after a medical hardship

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer who accidentally deposited an IRA distribution into a non-IRA account while dealing with a medical condition that impaired her ability to manage financial affairs. The taxpayer’s son later redeposited the amount into an IRA, and the taxpayer represented that the funds had not been used. The IRS gave her 60 days from the ruling date to contribute the amount to a rollover IRA. The waiver applies only if the other requirements for a rollover are satisfied.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover requirement?
• Outcome: Approved, subject to the stated rollover conditions
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(3), 6110; Rev. Proc. 2003-16

Full text (IRS public release)

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

JUL 21 2011

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

[illegible handwritten notation]

Legend:

Taxpayer A =
IRA B =
Financial Institution C =
Account D =
IRAE =
Financial Institution F =
State G =
State H =

Amount 1 =

Dear

This letter is in response to a request for a letter ruling dated April 5, 2011, as supplemented by additional information dated May 6, 2011, from your authorized representative, in which you have requested a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code

("Code).

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested:

Taxpayer A, age [redacted], represents that she took a distribution of Amount 1 from IRA B. Taxpayer A asserts that her failure to accomplish a rollover within the

2 901141022

60-day period prescribed by Code section 408(d)(3) was due to her medical condition which impaired her ability to manage her financial affairs. Taxpayer A further asserts that Amount 1 has not been used for any purpose.

Taxpayer A maintained IRA B, an individual retirement account (IRA) under section 408 of the Code. Taxpayer A represents that, in December of 2008, she and her husband moved from State G to State H so that they could live in a senior care facility near their son. In October, 2010, Taxpayer A was informed by Financial Institution C that a certificate of deposit (CD) in IRA B was about to mature. They asked Taxpayer A how she would like Financial Institution C to handle this event. Taxpayer A instructed Financial Institution C to send her these assets so she could deposit them in a local bank (Financial Institution F). On October 29, 2010, Taxpayer A deposited a check totaling Amount 1 into Account D. Taxpayer A attempted to deposit Amount 1 into an IRA with Financial Institution F and assumed she had taken appropriate steps to accomplish this. On January 25, 2011, Taxpayer A’s son discovered Account D was a non-IRA account and re-deposited Amount 1 in IRA E, on Taxpayer A's behalf.

Taxpayer A represents that she has difficulty remembering and managing the family financial affairs which prevented her from discovering her mistake ina timely manner. The ruling request is supported by a letter from her physician that explains Taxpayer A’s medical condition and the affect of several medications on her memory, thinking process and ability to manage her financial affairs including her inability to complete the rollover timely into the proper account.

Based on the above facts and representations, you request 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) of the Code, 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 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

901141022

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) of the Code).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code does not apply to any amount described in section 408(d)(3)(A)(i) of the Code 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) of the Code from an IRA which was not includible in gross income because of the application of section 408(d)(3) of the

Code.

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.

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) 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 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 medical condition which impaired her ability to manage

her financial affairs.

Therefore, pursuant to section 408(d)(3) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount 1 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this letter ruling to contribute Amount 1 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 1 will be considered a rollover contribution

within the meaning of section 408(d)(3) of the Code.

4 901141022

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 ruling does not authorize the rollover of amounts that are required to be distributed by section 401(a)(9) of the Code [section 408(d)(3)(E) 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.

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 (I.D. # ), ,at( ) -
Sincerely yours,

[signature]
Manager

Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437

cc: