PLR 201349026: Medical emergency qualifies for a 60-day IRA rollover waiver

Plain-English summary

An individual received a distribution from an IRA and deposited it into several bank accounts. A medical emergency and hospitalization lasted beyond the 60-day rollover period, preventing the individual from depositing the amount into another IRA. The IRS waived the 60-day requirement under Section 408(d)(3)(I) and gave the taxpayer 60 days from the ruling letter to contribute the amount to a rollover IRA. The waiver did not cover amounts required to be distributed under Section 401(a)(9), and all other rollover requirements still applied.

Ruling snapshot

• Question: Could a taxpayer receive a waiver of the 60-day IRA rollover deadline because of a medical emergency and hospitalization?
• Outcome: Approved. The taxpayer received a 60-day extension to contribute the distributed amount to a rollover IRA.
• Key authorities: IRC §§ 401(a)(9), 408(a)(6), 408(d)(3)(A), (D), and (I); 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

SEP 09 2013
Uniform Issue List: 408.03-00

[illegible]

Legend:
Taxpayer A = XXX

IRA P = XXX
Amount M = XXX

Dear XXX:

This is in response to your request submitted on your behalf by your authorized representative dated June 4, 2012, as supplemented by correspondence dated August 8, 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 received a distribution of Amount M from IRA P on August 24, 2011. Taxpayer A asserts that her failure to accomplish a rollover of Amount M within the 60-day period prescribed by section 408(d)(3) of the Code was due to her medical emergency and hospitalization during the 60-day rollover period.

On August 24, 2011, Taxpayer A took a distribution of Amount M from IRA P. On that same day, Taxpayer A deposited Amount M into several different bank accounts. On October 6, 2011, Taxpayer A had a medical emergency. She was subsequently hospitalized from October 6, 2011 until November 7, 2011, which extended beyond the 60-day rollover period. Taxpayer A submitted documentation from her treating physician confirming both her medical emergency and hospitalization. Taxpayer A represents that she was unable to complete the rollover during the 60-day rollover period because of her medical emergency and hospitalization.

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

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).

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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Revenue Procedure 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) 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 documentation submitted by Taxpayer A is consistent with her assertion that her failure to accomplish a timely rollover of Amount M was due to her medical emergency and hospitalization during the 60-day rollover period, resulting in the failure to deposit Amount M into another IRA within 60 days after being distributed from IRA P.

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 M from IRA P. Taxpayer A is granted a period of 60 days from the issuance of this letter ruling to contribute Amount M 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 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, made applicable to IRAs pursuant to section 408(a)(6).

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 XXXX at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Employee Plans Technical Group 2

Enclosures:
XX

CC:
XX