PLR 1327023: IRS waives the 60-day rollover requirement after a medical injury

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer to roll part of an IRA distribution into another IRA. The taxpayer said a medical injury during the rollover period required home medical care, use of a support walker, and pain medication that affected her ability to manage her financial affairs. She completed a partial rollover after the deadline and used the remainder for medical expenses. The IRS treated the contribution as a valid rollover, provided the other requirements of section 408(d)(3) were met.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement because a medical injury prevented a timely partial rollover?
• Outcome: Approved
• Key authorities: IRC § 408(a), § 408(d)(1), § 408(d)(3), and § 408(d)(3)(I)

Full text (IRS public release)

201327023

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

APR 08 2013

Uniform Issue List: 408.03-00

XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

[illegible handwritten notation]

Legend:

Taxpayer A = XXXXXXXXXXXXXX
IRA B = XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
Financial Institution C = XXXXXXXXXXXXXX
Bank D = XXXXXXXXXXXXXX
IRA E = XXXXXXXXXXXXXX
Amount 1 = XXXXXXXXXXXXXX
Amount 2 = XXXXXXXXXXXXXX
Amount 3 = XXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXX:

This letter is in response to a request for a letter ruling dated October 12, 2012,
as supplemented by additional correspondence dated February 21, 2013, in
which you request a waiver of the 60-day rollover requirement contained in
section 408(d)(3) of the Internal Revenue Code ("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 from IRA B totaling
Amount 1. Taxpayer A asserts that her failure to accomplish a rollover of
Amount 2, within the 60-day period prescribed by section 408(d)(3), was due to a
medical condition that occurred within the 60-day rollover period.

2

Taxpayer A maintained IRA B, an individual retirement account, under section
408(a) of the Code, with Financial Institution C. On July , 20, Taxpayer A
received a distribution of Amount 1 from IRA B with the intention to rollover the
distribution within the 60-day rollover period. After the distribution, Taxpayer A
requested and received information regarding possible investments of Amount 1.
On August , 20, within the 60-day rollover period, Taxpayer A suffered a
medical injury which necessitated her receiving home medical care for 10-days
and her using a support walker. Taxpayer A asserts that she was unable to wear
a shoe for several weeks and was also prescribed pain medication during this
period which affected her ability to manage her financial affairs. Taxpayer A
further asserts that she is of advanced age and did not have any family close that
could help her during this period. On September , 20, after recovering from
the medical condition, and after the expiration of the 60-day period, Taxpayer A
completed the rollover of Amount 2 with Bank D, depositing Amount 2 into IRA E.
Taxpayer A asserts that Amount 3 (Amount 1 - Amount 2) was used to cover
medical expenses.

Based on the above facts and representations, you request that the Internal
Revenue Service ("Service") waive the 60-day rollover requirement contained in
section 408(d)(3) of the Code with respect to the distribution of Amount 2.

Section 408(d)(1) of the Code provides that, except as otherwise provided in
section 408(d) of the Code, 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 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) of the Code).
Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code
does not apply to any amount described in section 408(d)(3)(A)(i) of the Code
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) of the Code from an IRA which was not

includible in gross income because of the application of section 408(d)(3) of the
Code.

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.

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 sections 408(d)(3)(I) and 402(c)(3)(B) 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 the documentation submitted by Taxpayer A is
consistent with her assertion that her failure to accomplish a timely rollover of
Amount 2, a portion of Amount 1, was due to a medical injury that occurred
during the 60-day rollover period.

Therefore, pursuant to section 408(d)(3)(I), the Service hereby waives the 60-day
rollover requirement with respect to the distribution of Amount 2 from IRA B.
Provided all other requirements of section 408(d)(3) of the Code, except the 60-
day requirement, were met with respect to Taxpayer A's contribution of Amount 2
into IRA E, on September , 20, such contribution will be considered a
rollover contribution within the meaning of section 408(d)(3) 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.

4

If you wish to inquire about this ruling, please contact XXXXXXXXXXXX
(identification No. XXXXXXXX) at (XXX) XXX-XXXX. Please address all
correspondence to SE:T:EP:RA:T1.

Sincerely yours,

[signature illegible]

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437