PLR 201324023: IRS waives an IRA rollover deadline after medical treatment

Plain-English summary

An IRA owner withdrew funds to move them to a self-directed IRA but did not complete the rollover within 60 days. The taxpayer's medical conditions and related treatments impaired the ability to complete the rollover, and the distributed amount was not used for another purpose. The IRS waived the deadline and gave the taxpayer 60 days from the ruling date to contribute the amount to a rollover IRA. The ruling did not authorize rollover of amounts required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover deadline after medical conditions and related treatment prevented a timely rollover?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3)(I), 401(a)(9), and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201324023

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES MAR 20 2013

DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T2

Legend:
Taxpayer = ***
Financial Institution A = ***
Financial Institution B = ***
Amount = ***
Year 1 = ***
Year 2 = ***
IRA = ***
Dear ***,

This is in response to your request dated August 3, 2012, as supplemented by correspondence dated November 1, 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 he received a distribution from IRA totaling Amount. Taxpayer 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’s medical conditions and related treatments which impaired his ability to accomplish a timely rollover. Taxpayer further represents that Amount has not been used for any other purpose.

Taxpayer withdrew Amount on October 21, Year 1, from IRA in order to find a better interest rate and to transfer the distributed funds to a self-directed IRA. At the time of the distribution and during the 60-day rollover period, Taxpayer was receiving medical treatments for and suffered from medical conditions that impaired his ability to accomplish the rollover within the 60-day time frame. Clinical documentation indicates

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that his condition worsened during this time. Taxpayer asserts that as a result of his medical condition he misunderstood the 60-day rollover requirement as originally explained by Financial Institution A. Taxpayer attempted to rollover IRA at Financial Institution B on April 18, Year 2, and was told by Financial Institution B that the 60-day rollover period had expired.

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.

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.

(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.

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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 his assertion that his failure to accomplish a timely rollover was caused by Taxpayer’s medical condition and related treatments which impaired his ability to accomplish a timely rollover.

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 from IRA. Taxpayer is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 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 will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

This letter assumes that the above IRA qualifies under either section 408 of the Code or section 408A of the Code at all relevant times.

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 *** at ***. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Donzelli H. Littlejohn, Manager,
Employee Plans Technical Group 2

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