IRS waives the 60-day IRA rollover deadline after a serious diagnosis

Plain-English summary

The IRS waived the 60-day rollover requirement for an individual who withdrew money from an IRA and did not complete the rollover after being diagnosed with an aggressive malignancy. The IRS accepted the taxpayer's medical documentation and concluded that the medical condition caused the missed deadline. The taxpayer received 60 days from the ruling date to contribute the redacted amount to a rollover IRA. The contribution would be treated as a valid rollover if all other requirements of IRC § 408(d)(3) were met.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover deadline because a serious medical condition prevented timely completion?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3), including § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224 201240035

COMMISSIONER JUL 11 2012

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

Legend:

IRA X:
Amount M:

Dear

This is in response to your letters dated July 16, 2011, September 23, 2011, February 15, 2012, March 13, 2012, March 14, 2012 , April 19, 2012, and June 29, 2012, in which you request 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 50, represents that he received a distribution of Amount M from his Individual Retirement Account (IRA), IRA X. Taxpayer A asserts that his failure to accomplish a rollover of Amount M within the 60-day period prescribed by section 408(d)(3) of the Code was due to his medical condition.

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

On November 16, 2009, Taxpayer A withdrew Amount M from IRA X and deposited the funds in a non-IRA account with the intention to re-deposit Amount M into another IRA within 60 days of the withdrawal.

On January 8, 2010, within the 60-day period, Taxpayer A met with his physician and was diagnosed with an extremely aggressive malignancy and immediately

began medical treatments. Taxpayer A represents that he was mentally shocked and mentally depressed by the diagnosis and all financial plans for retirement became moot in his mind. Further Taxpayer A represents that the effect of the

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diagnosis overwhelmed his ability to complete the rollover within the 60-day rollover period.

Taxpayer A has submitted medical documentation showing the nature of the diagnosis, the date of the diagnosis, and the dates of his treatments.

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 with respect to the distribution of Amount M.

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 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.

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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.

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 his assertion that the failure to accomplish a rollover of Amount M

within the 60-day period prescribed by section 408(d)(3) of the Code was due to his medical condition.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Internal Revenue Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount M from IRA X. Pursuant to this ruling letter, Taxpayer A is granted a period of 60 days from the date of the issuance of this letter ruling to make a rollover contribution of Amount M to a rollover IRA. Provided all other requirements of Code section 408(d)(3), except the 60-day requirement, are met with respect to such contribution, Amount M will be considered a valid 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.

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If you have any questions, please contact (I.D.# ~) by phone at or fax at

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose