PLR 1325022: IRS waives the 60-day IRA rollover deadline

Plain-English summary

The IRS waived the 60-day deadline for rolling an IRA distribution into another IRA. The taxpayer's husband had dementia during the rollover period, which impaired his ability to remember the deadline and make financial decisions. The IRS allowed the taxpayer to contribute the distributed amount to a rollover IRA within 60 days after the ruling letter was issued, subject to the other rollover requirements. The ruling did not authorize a rollover of amounts required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day IRA rollover requirement because the account owner's dementia prevented a timely rollover?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3), 401(a)(9), and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

201325022

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

COMMISSIONER

MAR 26 2013

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

T:EP:RA:T2

Legend:

Taxpayer A: ***

Taxpayer B: ***

IRA X: ***
***

Amount A: ***

Financial Institution A: ***

Dear ***:

This is in response to your request dated April 17, 2012, as supplemented
by correspondence dated May 24, 2012 and July 19, 2012, and September 27,
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 A represents that her husband, Taxpayer B, received a
distribution from IRA X, maintained by Financial Institution A, totaling Amount A.
Taxpayer A asserts that Taxpayer B’s failure to accomplish a rollover within the
60-day period prescribed by section 408(d)(3) of the Code was due to Taxpayer
B’s medical condition which impaired his ability to make decisions during the 60-
day period. Taxpayer A asserts that she has power of attorney for Taxpayer B.

*** Page 2 201325022

Taxpayer A represents that on May 18, 20 [illegible], Taxpayer B took a
distribution from IRA X, maintained by Financial Institution A, totaling Amount A.
Taxpayer A represents that Taxpayer B’s failure to accomplish a rollover within
the 60-day period prescribed by section 408(d)(3) of the Code was due to his
dementia. During this same time period, Taxpayer A became concerned about
Taxpayer B’s mental condition and his ability to make financial decisions. Two
treating physicians diagnosed Taxpayer B with dementia during independent
visits on July 5, 20 [illegible], and August 11, 20 [illegible]. Taxpayer A did not discover the
distribution from IRA X to Taxpayer B until early 2012, when she received a Form
1099 for IRA X. She then consulted an attorney and submitted this ruling
request.

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).

*** Page 3 201325022

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 A,
including diagnoses of two of Taxpayer B’s treating physicians, is consistent with
her assertion that Taxpayer B’s failure to accomplish a timely rollover was
caused by his dementia, which impaired his ability to remember deadlines and
his financial decision making.

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) 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.

*** Page 4 201325022

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.

Donzell Littlejohn, Manager,
Employee Plans Technical Group 2

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

CC: