PLR 201223023: IRS waives the 60-day IRA rollover deadline

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer who had taken a distribution from an individual retirement annuity and failed to complete the rollover because of a cognitive impairment. The taxpayer had intended to move the funds to an FDIC-insured account but mistakenly placed the amount intended for rollover in a non-IRA certificate of deposit. The IRS excluded the required minimum distribution from the rollover amount and gave the taxpayer 60 days from the ruling date to contribute the remaining amount to a Rollover IRA. The waiver was limited to the specific distribution and remained subject to the other requirements of IRC § 408(d)(3).

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day rollover requirement for the distribution intended for rollover?
• Outcome: Approved, with 60 days from the ruling date to contribute the rollover amount to a Rollover IRA.
• Key authorities: IRC § 408(d)(3), including § 408(d)(3)(I); IRC § 72

Full text (IRS public release)

201223023

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

TAX EXEMPT AND MAR 1 4 2012

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

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Legend:

Taxpayer A = XXXXXXXXXXXXXXX
IRA B = XXXXXXXXXXXXXXXX
Financial Institution C = XXXXXXXXXXXXXXXX
Bank D = XXXXXXXXXXXXXXX
Bank E = XXXXXXXXXXXXXXXXXX
Amount 1 = XXXXXXXXXXXXXXXXXX
Amount 2 = XXXXXXXXXXXXXXXX
Amount 3 = XXXXXXXXXXXXXXXXX
Dear XXXXXXXXXXXXXX:

This is in response to your request dated May 1, 2011, as supplemented by additional correspondence dated December 12, 2011, 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 she received a distribution from IRA B totaling Amount 1. Taxpayer A asserts that her failure to accomplish a rollover within the 60- day period prescribed by section 408(d)(3) was due to her medical condition which impaired her ability to accomplish a timely rollover. Taxpayer A further represents that

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Amount 2, the portion of Amount 1 that she is seeking to roll over, has not been used for any other purpose.

Taxpayer A maintained IRA B, an individual retirement annuity, under section 408(b) of the Code, with Financial Institution C. Believing that her annuity was not federally insured, Taxpayer A decided to rollover her IRA annuity to a bank where the funds would be insured under the FDIC. On August 6, 2010, Taxpayer A, by telephone, requested that her IRA annuity, Amount 1, be transferred directly to a non-IRA account with Bank D. On August 11, 2010, Taxpayer A telephoned Bank D and requested that Amount 2 be transferred to a CD with Bank E but due to a cognitive impairment she failed to ascertain that the CD was an IRA CD. Amount 2 was Amount 1 less Amount 3 which was Taxpayer A’s required minimum distribution for 2010. Documentation submitted includes a statement from her physician that Taxpayer A suffers from a cognitive impairment which affected her ability to complete a timely rollover of Amount

2. Amount 2 remains in the non-IRA CD with Bank E.

Based on the facts and representations, you request a ruling that the Internal Revenue Service waive the 60 day rollover requirement contained in section 408(d)(3) of the Code in this instance with respect to the distribution of Amount 2.

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

201223023

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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.

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), 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 her assertion that her failure to accomplish a timely rollover was caused by her medical condition which impaired her ability to accomplish a timely rollover.

Therefore, pursuant to section 408(d)(3)(B) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount 2 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 2 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 2 will be considered a rollover contribution within the meaning of

section 408(d)(3) 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.

201223023

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If you wish to inquire about this ruling, please contact Darnell C. Hardy (ID 50-39395) at (202) 283-9647. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,

Carlton Watkins, Manager
Employee Plans Technical Group 1

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