PLR 1314055: IRS waives the 60-day IRA rollover deadline after a taxpayer's bereavement-related mental impairment

Plain-English summary

An individual received a distribution from a deceased spouse's IRA but did not complete the rollover within 60 days. The individual represented that anxiety and stress following the spouse's death impaired her ability to handle financial matters, and medical documentation supported that explanation. She kept the distributed amount and later deposited it into a rollover IRA. The IRS waived the 60-day requirement under IRC § 408(d)(3)(I), provided the other rollover requirements were satisfied. 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 because the taxpayer's mental condition 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)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201314055

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 09 2013

U.I.L. 408.03-00

XXXXXXXXXXXXXXXXXXXXXXXX & 5 1 7. '¢. a |

XXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXKXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXXXXX
Individual B = XXXXXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXXXXX
IRA Y = XXXXXXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXXXXX
Bank B = XXXXXXXXXXXXXXXXX
Company C = XXXXXXXXXXXXXXXXXX

Dear XXXXXXXxX:

This letter is in response to your request dated xxxxxxxxXxXxxx, as supplemented
by correspondence dated xxxxxxxxxxxx, 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 A represents that she received a distribution on December , 20 ,
from IRA X totaling Amount D. Taxpayer A asserts that her failure to accomplish
a rollover within the 60-day period prescribed by section 408(d)(3) of the Code
was due to her mental condition following the death of Individual B which
impaired her ability to handle her financial affairs. Taxpayer A represents that
Amount D has not been used for any other purpose.

201314055

Individual B, the spouse of Taxpayer A, died on November , 20’ . Following
Individual B’s death, on December , 20_ , Taxpayer A received a distribution
of Amount D as proceeds from her deceased husband’s IRA X and on the same
day deposited the funds received into her money market account with Bank B.
Taxpayer A suffered from anxiety and stress related to the death of Individual B.
It was not until after the expiration of the 60-day rollover period that Taxpayer A
realized that Amount A should have been rolled over into a rollover IRA. Medical
documentation submitted verifies Taxpayer A’s mental condition during the 60-
day rollover period.

After the expiration of the 60-day rollover period, on March , 20 , a check for
Amount D, payable to Company C was received by Taxpayer A’s financial
advisor to establish a rollover IRA. On that same date Amount D was deposited
into IRA Y.

Based upon 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 D.

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 received 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 included 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 and good
conscience, including casualty, disaster, or other events beyond the reasonable
control of the individual subject to such requirement. Only distributions that occur
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, 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, or hospitalization, incarceration, restrictions imposed by a
foreign country or postal error; (3) the use of 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 her assertion that her failure to accomplish a timely rollover was
due to her mental condition which impaired her ability to handle her financial
affairs 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
D. Provided all other requirements of Code section 408(d)(3), except the 60-day
requirement, were met with respect to the contribution of Amount D to IRA Y on
March 10, 2010, such contribution will be considered a rollover contribution within
the meaning of section 408(d)(3) of the Code.

201314055

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 transactions described
herein under the provisions of any other section of either the Code or regulations,
which may be applicable thereto.

A copy of this letter is being sent to your authorized representative pursuant to a
power of attorney on file in this office.

A user fee of $625.00 was paid with your ruling request. Pursuant to section
6.04(a) of Rev. Proc. 2013-8, 2013-1, I.R.B. 237 the correct user fee for your
request is $500.00. Accordingly, a check for $125.00 will be issued under
separate cover to the payee of the user fee.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited by others as precedent.

If you have any questions concerning this ruling, please contact xxxxxxxx, XXXXXX
at XXXXXXXXxxxx. Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted copy of letter ruling
Notice 437

CC: XXXXXXXXXXXXXXXXX