PLR 201143031: IRS waives the 60-day IRA rollover deadline because of diminished capacity

Plain-English summary

The IRS granted a waiver of the 60-day rollover requirement for an IRA distribution. The taxpayer, who was 78, represented that diminished mental capacity and moderate dementia prevented him from understanding the withdrawal and completing a timely rollover. The distributed amount was deposited into a credit union account and had not been used for another purpose. The IRS gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover requirement because the taxpayer could not complete the rollover due to diminished mental capacity?
• Outcome: approved
• Key authorities: IRC §§ 401(a)(9), 408(d)(1), 408(d)(3), and 6110(k)(3)

Full text (IRS public release)

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DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
AUG 05 2011
U.I.L. : 408.03-00
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5455.00.00 0000 0000000004
Legend:
individual A = OCOOOOLQOOOOOKLXIOVIOO
Taxpayer B = WOOOKKXXXXXAXXXAXXKK
IRA X = XXMIOIOKAKKKKKKKK KICK,
Amount D = OOOOH XXKAKKKKK

Credit Union B = XXxXxOOCOCOCOOOXKKXKKXX
Company C = OOOO OOK XOX

Date 7 = WOOOOOOOCOOOOOKXXKK
Date 2 = XXOOOOOOOMXKXIOIOKK
Date 3 = XQOOOOOOCOOCOOOOCO0OX
Dear 2000C000C

This is in response to your request dated March 30, 2011, as supplemented by correspondence dated May 09, 2011, June 09, 2011, and June 28, 2011, submitted on your behalf by your wife (Individual A) 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 penalties of perjury in support of your request.

2

Taxpayer B, age 78, received a distribution from IRA X totaling Amount D. Taxpayer B asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to his diminishing mental capacity which affected his ability to understand and handle his financial

transactions.

Taxpayer B maintained IRA X with Company C. On Date |, Taxpayer B withdrew Amount D from IRA X and on Date 2 deposited it with Credit Union B. Taxpayer B represents that he has limited memory retention and moderate dementia which caused problems with his judgment and that he did not understand the implications of the withdrawal. IRA X is in Taxpayer B's name and Individual A who generally assists Taxpayer B with his financial decisions was not aware that Taxpayer B made the withdrawal until Date 3. Documentation submitted supports the assertion that Taxpayer B suffers from loss of memory and impaired judgment and is not capable of making financial decisions. Amount D has not

been used for any other purpose.

Based upon the above facts and representations, Taxpayer B requests 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 received 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)).

201143033

; 201143034

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 included 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)(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 and good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement. Only distributions that occur after December 31, 2001, are eligible for the waiver under section 408(d)(3)(I) of

the Code.

Rev. Proc. 2003-16, 2003-4 |.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), 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, or hospitalization, incarceration, restrictions imposed by a foreign country or postal error, (3) the use of 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 on behalf of Taxpayer B is consistent with the assertion that his failure to accomplish a timely rollover during the 60-day rollover period was due to his diminishing. mental capacity which affected his ability to understand and handle his financial transactions.

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

9011430314

No opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the Code or regulations,

which may be applicable thereto.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

If you‘have any questions regarding this letter, please contact WOOODOOOOOOOOKKK, SE-:T:EP:RA:T3 at 100000000Kxx.

Sincerely yours,

Ade ¥2

ge Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:

Deleted copy of letter ruling
Notice 437 ,

TOTAL P.009