PLR 1311037: IRS waives rollover deadlines for a married couple affected by a mental condition

Plain-English summary

The IRS waived the 60-day rollover requirement for three IRA distributions received by a married couple. The wife’s mental condition impaired her ability to make financial decisions, and the couple represented that the distributed amounts had not been used for another purpose. The IRS granted 60 days from the ruling date to contribute the amounts to rollover IRAs, subject to the other rollover requirements.

Ruling snapshot

• Question: What relief did the IRS grant under the applicable rollover or pension funding rules?
• Outcome: Approved.
• Key authorities: IRC § 408

Full text (IRS public release)

201311037

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

COMMISSIONER DEC 2 7 2012

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

' TEP ATE

kRK

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Legend:
TaxpayerA - =

Taxpayer B =

IRA X = ttt

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It
*

IRA Y

IRA Z = ott

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Financial Institution A =
Financial Institution B =
Amount A = ***
Amount B =

Amount C =

Dear * * *:

This is in response to your request dated April 23, 2012, as supplemented by
correspondence dated October 17, 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’).

201311039
Page 2

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

Taxpayer A and Taxpayer B represent that Taxpayer A received distributions
from IRA X totaling Amount A and from IRA Y totaling Amount B, and that Taxpayer B
received a distribution from IRA Z totaling Amount C. Taxpayer A and Taxpayer B
assert that their failure to accomplish rollovers within the 60-day period prescribed by
section 408(d)(3) of the Code was due to Taxpayer A's mental condition which impaired
her ability to make financial decisions during the 60-day period. Taxpayer A and
Taxpayer B further represent that Amount A, Amount B, and Amount C have not been
used for any other purpose.

Taxpayer A and Taxpayer B are married. Taxpayer A handled the couple's
finances and Taxpayer B relied on Taxpayer A for financial guidance. Taxpayer A was
the owner of IRA X at Financial Institution A and IRA Y at Financial Institution B.
Taxpayer B was the owner of IRA Z at Financial Institution A.

Taxpayer A has been diagnosed with a mental condition rendering her judgment,
insight, and memory poor. On June 16, 2011, Taxpayer A had Amount A distributed
from IRA X, and, based on Taxpayer A's insistence, Taxpayer B had Amount C
distributed from IRA Z. On July 29, 2011, Taxpayer A had Amount B distributed from
IRA Y. Due to her mental condition, Taxpayer A did not believe the employees of
Financial Institution A and Financial Institution B when they tried to inform her of the
consequences of the distributions, and made the distributions without any understanding
of her actions.

Because Taxpayer A's mental condition is not improving, Taxpayer A and
Taxpayer B have represented that their son will be added to their accounts and will have
the Power of Attorney for their affairs.

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 distributions of Amount A, Amount B, and Amount C.

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.

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) 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

. 201311039
Page 3

(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)
(related to required minimum distributions under section 401(a)(9) and incidental death
benefit requirements of section 401(a)).

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) 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) of the Code, 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 and
Taxpayer B is consistent with their assertion that their failure to accomplish timely
rollovers was caused by Taxpayer A's mental condition which impaired her ability to
make financial decisions during the 60-day period.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distributions of Amount A
from IRA X, Amount B from IRA Y, and Amount C from IRA Z. Taxpayer A and
Taxpayer B are granted a period of 60-days from the issuance of this ruling letter to
contribute Amount A and Amount B into rollover IRAs for Taxpayer A, and Amount C into
a rollover IRA for Taxpayer B. Provided all other requirements of section 408(d)(3),
except the 60-day requirement, are met with respect to such contributions, Amount A,
Amount B, and Amount C will be considered rollover contributions within the meaning of
section 408(d)(3).

201311037

Page 4

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

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 taxpayers who requested it. Section 6110(k)(3)
of the Code provides that it may not be used or cited as precedent.

Pursuant to the power of attorney on file with this office, a copy of this letter ruling
is being sent to your authorized representative. If you wish to inquire about this ruling,
please contact** at ( )-***. Please address all correspondence

to SE:T:EP:RA:T2.
Sincerely yours,
—Dmz “ ottbesh

Donzell H. tittlejohn, Manager,
Employee Plans Technical Group 2

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

cc: RKK