PLR 1330046: IRS waives the 60-day rollover requirement after a spouse's death

Plain-English summary

The IRS waived the 60-day rollover requirement for an individual who received a distribution from a deceased spouse's IRA. The taxpayer represented that grief, a medical condition, and related mental impairment prevented her from making financial decisions during the rollover period. She later learned that the distribution was taxable and deposited it into another IRA almost a year after receiving it. The IRS found that the circumstances justified relief under § 408(d)(3)(I), subject to the other rollover requirements.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement after the taxpayer's spouse died and the taxpayer was unable to make financial decisions?
• Outcome: Approved, the IRS waived the 60-day requirement for the specified distribution.
• Key authorities: IRC §§ 408(d)(3)(I), 408(d)(3), 401(a)(9), and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201330046
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAY 01 2013

Uniform Issue List: 408.03-00

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T:EP:RA:T3

Legend:

Taxpayer A = XXXXXXXXXXXXXXX
Decedent B = XXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXX
IRA Y = XXXXXXXXXXXXXXX
Company C = XXXXXXXXXXXXXXX
Amount A = XXXXXXXXXXXXXXX
Date 1 = XXXXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXXXX
Date 3 = XXXXXXXXXXXXXXX
Date 4 = XXXXXXXXXXXXXXX
Dear XXXXXXXXXX:

This is in response to your request, dated July 26, 2012, 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”).

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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 Decedent B’s
IRA X totaling Amount A. Taxpayer A asserts that her failure to accomplish a
rollover within the 60-day period prescribed by section 408(d)(3) was due to
Taxpayer A's mental state and medical condition following the death of her
husband, Decedent B, which impaired her ability to make financial decisions
during the 60-day rollover period.

Decedent B owned IRA X and a life insurance policy with Company C.
Taxpayer A was the sole beneficiary of IRA X.

Decedent B had been ill for ten years before his death. Decedent B had
been increasingly dependent upon Taxpayer A over that ten-year period,
including periods of recovery from approximately ten major surgical procedures.
Taxpayer A was overwhelmed by the heavy burden of her duties as caregiver
and, finally, further overwhelmed by grief during the time following Decedent B’s
eventual death on Date 1.

Taxpayer A was in no mental state after Decedent B’s death to make
financial decisions. In addition, during such time, Taxpayer A had a disabling
disease, which had caused visual impairment progressing toward blindness. A
letter from Taxpayer A’s physician states that Taxpayer A suffered from long-
standing depression, anxiety and memory impairment, and that she experienced
a cognitive “perfect storm” at the death of her husband, such that in the months
preceding her husband’s death, and subsequently, she did not have medical or
financial decision making capability.

Following Decedent B’s death, Taxpayer A found what she believed to be
two life insurance policies on Decedent B. On Date 2, Taxpayer A completed the
required forms to claim what she believed were death benefits. At that time,
Taxpayer A was not aware that IRA X was not a life insurance policy. Taxpayer A
received the distribution of Amount A on Date 3. It was not until April of 20 [illegible],
when Taxpayer A was having her tax returns prepared that she became aware
that Amount A was a taxable distribution from IRA X. On Date 4, which was
almost a year after the date on which Taxpayer A received the distribution from
IRA X, Amount A was deposited into IRA Y.

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

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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).

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

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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 is
consistent with her assertion that her failure to accomplish a timely rollover was
due to her mental state and medical condition following the death of Decedent B,
which impaired her ability to make financial decisions 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. Provided all other requirements of section 408(d)(3) of
the Code, except the 60-day requirement, were met, the contribution of Amount
A into IRA Y on Date 4 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 that 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.

Pursuant to a power of attorney on file with this office, a copy of this letter
is being sent to your authorized representative.

201330046

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If you wish to inquire about this ruling, please contact xxxxxxxxxxx (ID
XXXXXXX) at (xxx) xxx-xxxx. 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 ruling letter
Notice of Intention to Disclose

cc: XXXXXXXXXXXXX
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