PLR 201314053: IRS waives an IRA rollover deadline after the account owner's serious illness and death

Plain-English summary

An IRA owner received a distribution and deposited it into a checking account, intending to complete a rollover. During the 60-day period, his health rapidly declined because of a brain disorder attributed to liver disease, and he died before completing the rollover. A physician confirmed his debilitating condition, and the distributed amount was not used for another purpose. The IRS waived the 60-day requirement under IRC § 408(d)(3)(I) and gave the surviving spouse 60 days from the ruling date to contribute the amount to a rollover IRA. The ruling did not authorize a rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement after the account owner's serious illness and death prevented a timely rollover?
• Outcome: approved
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(1), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

DEPARTMENT OF THE TREASURY 201314053

TAX EXEMPT AND JAN 10 2013

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

T:EP:RA:T2

Legend:
Decedent = XXX
Taxpayer =XXX

IRA X = XXX
Account Y =XXX
Amount A = XXX

Dear XXX:

This is in response to your request dated May 22, 2012, as supplemented by your August 7, 2012, submission, submitted on your behalf by your authorized representative, 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, the widow of Decedent, represents that Decedent received a distribution from IRA X totaling Amount A on July , 20 . Taxpayer asserts that Decedent’s failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to his rapidly declining health, including a brain disorder, attributable to liver disease, during the 60-day period. Taxpayer further represents that Amount A has not been used for any other purpose.

Page 2

On July , 20 , Decedent took a distribution of Amount A from IRA X. On that same day, Decedent deposited Amount A into Account Y, a checking account. Taxpayer represents that during the 60-day rollover period, Decedent’s health rapidly declined, thus, preventing him from effecting a rollover. Decedent died on September , 20 , during the 60-day rollover period. Taxpayer provided a signed statement from Decedent’s treating physician confirming his debilitating medical condition, including a brain disorder triggered by severe liver disease, during the 60-day rollover period.

Taxpayer learned of the impact of the distribution of Amount A from IRA X upon receiving a form 1099 for the distribution. Upon receipt of this Form 1099, Taxpayer consulted her accountant and applied for this private letter ruling.

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 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).

XXX
Page 3 201314053

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.

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 is consistent with her assertion that Decedent’s failure to accomplish a timely rollover was caused by the rapid decline of his health during the 60-day rollover 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 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) of the Code, 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) of the Code.

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.

XXX

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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 XXX at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T2 .

Sincerely yours,

Donzel Littlejohn, Manager,
Employee Plans Technical Group 2

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

CC:

XXX
XXX
XXX
XXX