PLR 1311038: IRS waives the 60-day rollover deadline for a taxpayer with a disabling mental condition

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer whose mental condition impaired the ability to make financial decisions during the rollover period. The taxpayer represented that the distribution had not been used for another purpose, and medical documentation supported the request. The IRS granted 60 days from the ruling date to contribute the amount to a rollover IRA, 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)

201311038

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

xae*

mn Ti EP MAT

kek

ke

Legend:

xzkke*

Taxpayer A

IRA X = +t

nk

Financial Institution

kek

Amount A
Dear * * *:

This is in response to your request dated April 26, 2012, as supplemented by
correspondence received October 22, 2012, and October 23, 2012, in which your
representative requests, on your behalf, 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 represents that he received a distribution from IRA X totaling Amount
A. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3) of the Code was due to Taxpayer A's mental condition,
which impaired his ability to make financial decisions during the 60-day period. Taxpayer
A further represents that Amount A has not been used for any other purpose.

Taxpayer A owns IRA X maintained by Financial Institution. On June 1, 2011,
Taxpayer A was diagnosed with a mental condition that causes him to lack decision
making capacity and renders him unable to make informed financial decisions on his
own behalf. On July 28, 2011, Taxpayer A had Financial Institution distribute Amount A
to his non-IRA account at Financial Institution. Taxpayer A cannot recall why he did the
transfer. Taxpayer A has since appointed his daughter as his power of attorney for
financial matters.

201311038

Page 2

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.

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

(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.

Page 3 201311038

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,
including a statement from his treating physician confirming his diagnosis, is consistent
with his assertion that his failure to accomplish a timely rollover was caused by Taxpayer
A's mental condition which impaired his 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 distribution of Amount A from
IRA X. Taxpayer A is granted a period of 60-days from the issuance of this ruling letter
to contribute Amount A into a rollover IRA. Provided all other requirements of section
408(d)(3), except the 60-day requirement, are met with respect to such contribution,
Amount A will be considered a rollover contribution within the meaning of section
408(d)(3).

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.

Page 4 9013110838

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 ** * ot (")-* Please address all correspondence

to SE:T:EP:RA:T2.

Sincerely yours,

eas “w
“Littlejohn, Manager,
Employee Plans Technical Group 2

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

CC: kK