PLR 201235026: IRS waives the 60-day IRA rollover deadline because of a medical condition

Plain-English summary

The IRS waived the 60-day rollover deadline for a 69-year-old taxpayer who said a neurological condition prevented her from managing her financial affairs. She had withdrawn money from an IRA intending to keep it tax deferred, but placed it in a non-IRA account and did not complete the rollover on time. The IRS found that the medical condition impaired her ability to complete the rollover. It gave her 60 days from the ruling date to contribute the amount to a rollover IRA, subject to the other requirements of section 408(d)(3).

Ruling snapshot

• Question: Can the IRS waive the 60-day rollover requirement when a medical condition prevents a timely IRA rollover?
• Outcome: Approved, with 60 days from the ruling date to contribute the amount to a rollover IRA.
• Key authorities: IRC §§ 408(b), 408(d)(1), 408(d)(3), 408(d)(3)(I), and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201235026

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUN 14 2012

Uniform Issue List: 408.03-00

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SE:T:EP:RA:T1

Legend:

Taxpayer A = XXXXXXXXXXXXXX
IRA B = XXXXXXXXXXXXX

Financial Institution C = XXXXXXXXXXXXX

Account D = XXXXXXXXXXXXX
Amount 1 = XXXXXXXXXXXXX

Dear XXXXXXXXXXXXX:

This is in response to your request dated November 18, 2010, as supplemented by correspondence dated March 17, 2011, in which your authorized representative requested, on your behalf, 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 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 neurological condition which affected her ability to manage her financial affairs. Taxpayer A further represents that Amount 1 has not been used for any other purpose.

Taxpayer A, age 69, maintained IRA B, an individual retirement annuity under section 408(b) of the Code, with Financial Institution C. Taxpayer A asserts that she intended

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for her assets to remain in a tax deferred environment. Taxpayer A believed that she had to open a new account in order to change investments held in the IRA. On March 9, 2009, she withdrew Amount 1 from IRA B and placed the distribution into a non-IRA account with Financial Institution C. Taxpayer A met with Physician E on March 10, 2009, the day after she executed the withdrawal of Amount 1. Physician E noted that Taxpayer A was suffering from numerous symptoms of her disorder. Taxpayer A complained during this visit of anxiety, obsessive preoccupations about trying to please everyone, and an inability to maintain her attention. During the 60-day rollover period, Taxpayer A suffered severe side effects and complications that prevented her from carrying out her financial affairs, including completing a rollover. On December 4, 2009, Taxpayer A transferred Amount 1 from non-IRA account into Account D, another non- IRA account with Financial Institution C. Documentation submitted includes a statement from her physician that Taxpayer A suffers from a medical condition which impaired her ability to complete a timely rollover of Amount 1.

Based on the facts and representations, a ruling has been requested that the Internal Revenue Service waive the 60 day rollover requirement contained in section 408(d)(3) of the Code with respect to the distribution of 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

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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)(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 B is consistent with her assertion that Taxpayer A’s failure to accomplish a timely rollover was caused by her medical condition which impaired her ability to manage her financial affairs.

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. Taxpayer A 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.

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 is being sent to your authorized representative pursuant to a Power of Attorney on file in this office.

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If you wish to inquire about this ruling, please contact XXXXXXXXXXX (XXXXXXXXXX) at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,

[illegible signature]

Carlton Watkins, Manager
Employee Plans Technical Group 1

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