PLR 1306031: IRS denies a 60-day IRA rollover waiver for remodeling-related delay

Plain-English summary

The IRS considered a taxpayer who withdrew money from an IRA while remodeling a home and later decided to return the money after the 60-day rollover period had expired. The taxpayer said the remodeling issues impaired the ability to complete a timely rollover and represented that the money had not been used for another purpose. The IRS declined to waive the deadline because the taxpayer did not show that a qualifying factor, such as a financial institution error, death, disability, hospitalization, incarceration, or postal error, prevented the rollover. It characterized the withdrawal as a short-term loan for which the taxpayer assumed the risk of not replenishing the IRA on time.

Ruling snapshot

• Question: May the IRS waive the 60-day IRA rollover requirement after the taxpayer’s remodeling-related delay?
• Outcome: Denied
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201306031

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND NOV 16 2012
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

Legend:

Taxpayer = ****

IRA X = *********
******

Amount A = ***

Dear *****:

This is in response to your request dated May 10, 2012, 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 represents that she received a distribution from IRA X totaling Amount
A. Taxpayer asserts that her failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3) was due to issues surrounding her kitchen remodeling,
which impaired her ability to accomplish a timely rollover. Taxpayer further represents
that Amount A has not been used for any other purpose.

Taxpayer was remodeling her home and withdrew funds from her IRA in
anticipation of additional costs from the project. When she realized that she did not
need the funds and formed the intent to return them into the IRA, the 60-day period had
passed.

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 A.

201306031

Page 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 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.

The Service has the authority to waive the 60-day rollover requirement for a
distribution from an IRA where the individual failed to complete a rollover to another IRA
within the 60-day rollover period but was prevented from doing so because of one of the
factors enumerated in Rev. Proc. 2003-16, 2003-4 I.R.B. 359 (January 27, 2003), which
include: (1) errors committed by a financial institution; (2) death; (3) disability; (4)
hospitalization; (5) incarceration; and/or (6) postal error. In this instance, Taxpayer has
not presented any evidence to the Service as to how any of the above factors prevented
her from timely rolling over Amount A into IRA X. In essence, taxpayer made a short

201306031

Page 3

term loan when she withdrew Amount A from IRA X. In doing so, Taxpayer assumed the
risk that she would not be able to timely replenish Amount A.

Accordingly, the Service hereby declines to waive the 60-day rollover
requirement with respect to the distribution of Amount A from IRA X.

This ruling does not authorize the rollover of amounts that are required to be
distributed by section 401(a)(9) 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.

If you wish to inquire about this ruling, please contact *** (ID -*)
at (*) -*_. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,
Donzell Littlejohn, Manager
Employee Plans Technical Group

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