PLR 1343030: IRS waives the 60-day IRA rollover deadline after a medical condition caused an excess withdrawal

Plain-English summary

A taxpayer intended to withdraw only a required minimum distribution from an IRA but instead withdrew the entire account balance. The taxpayer attributed the mistake and the missed 60-day rollover deadline to a diagnosed progressive medical condition, and the withdrawn funds remained intact in a savings account. The IRS waived the 60-day requirement under IRC § 408(d)(3)(I) for the portion that was not the required minimum distribution, allowing the taxpayer 60 days from the ruling date to contribute that amount to a rollover IRA. The ruling did not authorize a rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement for the portion of an IRA distribution that was not the taxpayer's required minimum distribution?
• Outcome: Approved. The IRS waived the deadline for the rollover of Amount 3, subject to the other requirements of IRC § 408(d)(3).
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(1), 408(d)(3), 408(d)(3)(I), 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 31 2013

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Uniform Issue List: 408.03-00

T:EP:RA:T1

Legend:

Taxpayer A =

IRA B =

Bank C =

Bank D =

Account E =

Amount 1 =

Amount 2 =

Amount 3 =

Dear:

This letter is in response to your request dated March 6, 2013 and supplemented
by letter dated June 19, 2013, from 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 ("Code").

The following facts and representations have been submitted under penalty of
perjury in support of the ruling requested.

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Taxpayer A represents that he intended to withdraw Amount 2, his required
minimum distribution for 20 from IRA B. Instead Taxpayer A withdrew Amount
1, the entire account balance in IRA B. Taxpayer A asserts that his unintentional
withdrawal of the account balance as well as his failure to accomplish a rollover
of Amount 3 (the difference between Amount 1 and Amount 2) within the 60-day
period prescribed by Code section 408(d)(3) was due to a diagnosed progressive
medical condition.

Taxpayer A represents that he owned IRA B which was maintained with Bank C.
On June 22, 20 Taxpayer A went to Bank C intending to withdraw Amount 2, his
required minimum distribution from IRA B for 20 . Taxpayer A further represents
that as a result of his medical condition he instead withdrew Amount 1, the entire
balance, from IRA B. A cashier's check of Amount 1 was issued to Taxpayer A
and a representative of Bank C informed Taxpayer A that he had 60 days to
rollover the distribution of Amount 3. Taxpayer A indicated that he was moving out
of state and would deposit the funds there. However, on the same day as the
withdrawal, Taxpayer A deposited Amount 1 in Account E, a savings account of
Taxpayer A and his wife, maintained in Bank D. Amount 1 remains intact in
Account E. Taxpayer A also represents that the cashier's check from Bank C did
not state that the distribution was from an IRA and that the employee of Bank D
who handled the deposit did not question the transaction.

Taxpayer A has submitted documentation, including a letter from his doctor that
Taxpayer A was suffering from a progressive mental condition at the time of the
withdrawal on June 22, 20 . A letter from a representative of Bank D also states
that they were aware of Taxpayer A's mental condition at the time Amount 1 was
deposited in Account E.

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 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

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(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 sections 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 the documentation submitted by Taxpayer A is
consistent with his assertion that his failure to accomplish a timely rollover of
Amount 3 was due to a diagnosed progressive medical condition.

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
3 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this

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letter ruling to contribute Amount 3 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, the contribution will be considered a
rollover contribution within the meaning of section 408(d)(3).

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.

A copy of this letter ruling has been sent to your authorized representative
pursuant to a power of attorney on file in this office. If you wish to inquire about
this ruling, please contact ** (I.D. #*) at () -****. Please
address all correspondence to SE:T:EP:RA:T1

Sincerely yours,

Carlton A. Watkins, Manager

Employee Plans Technical Group 1

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

cc: