PLR 1351031: IRS waives the 60-day rollover deadline after a spouse's death

Plain-English summary

The ruling concerns a beneficiary who received an IRA distribution after her spouse died unexpectedly. She intended to roll the distribution into an IRA, but misunderstood a financial institution's combined claim form and deposited the money into a non-IRA account. The IRS found that her mental condition after the death, together with the confusing form and the fact that the money had not been used for another purpose, justified relief. It waived the 60-day rollover requirement under IRC § 408(d)(3)(I) and gave her 60 days from the ruling date to contribute up to the distributed amount to an IRA in her own name.

Ruling snapshot

• Question: May the IRS waive the 60-day IRA rollover deadline when a beneficiary misunderstood a financial institution's form after a spouse's death?
• Outcome: Approved
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201351031

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 19 2013

408.03-00 Rollover Contributions T:EP:RA:T1

Legend:
Taxpayer A =

Decedent B =

IRA C =

Account D =

Financial Institution E =

Account F =

Amount 1 =

Amount 2 =

Dear

This letter is in response to a request for a letter ruling dated April 1, 2013, as
supplemented by correspondence from August 1, 2013, 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
(“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 she received a distribution from IRA C, totaling
Amount 1, on July 14, 2011. Taxpayer A asserts that her failure to accomplish a
rollover within the 60-day period prescribed by section 408(d)(3) of the Code was
due to her mental condition following the sudden death of her spouse, Decedent
B, which impaired her ability to make financial decisions. Taxpayer A further
represents that Amount 1 has not been used for any other purpose.

Decedent B died unexpectedly in April 2011. Decedent B maintained two
accounts with Financial Institution E, an Individual Retirement Annuity (IRA C)
and a non-qualified annuity (Account D). On April 8, 2011, Financial Institution E
contacted Taxpayer A, as beneficiary, to process a claim for IRA C and Account
D. Although Decedent B maintained two accounts with Financial Institution E, it
sent Taxpayer A only one claim form to fill out for both the IRA annuity and the
non-IRA annuity. The claim form and the accompanying correspondence
described both accounts as policies, did not distinguish between an IRA and a
non-IRA annuity, and did not include any specific indication on how to
accomplish a rollover of an IRA annuity. The claim form also included two
opportunities for Taxpayer A to establish an account in her own name that would
continue to be maintained by Financial Institution E on her behalf. Taxpayer A
filled out the form and chose one of the options that allowed her to establish an
account in her own name (Account F) with Financial Institution E. She returned
the papers believing she had established a rollover IRA for Amount 1, but she
had actually chosen an option to receive a lump sum payment of both accounts
to be deposited into Account F, a non-IRA account with Financial Institution E.
Taxpayer A received confirmation that Amount 1 from IRA C and Amount 2 from
Account D were transferred to Account F on July 14, 2011. Taxpayer A
represents that she did not learn of her failure to roll over the proceeds of IRA C
until after the 60-day period had expired.

Based on the facts and representations, you request that the Service waive the
60-day rollover requirement contained in section 408(d)(3) of the Code with
respect to the distribution of Amount 1 from IRA C.

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

201351031

such individual not later than the 60th day after the day on which the individual
received 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 and 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).

Rev. Proc. 2003-16, 2003-4 I.R.B. 359, 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, or hospitalization, incarceration, restrictions imposed by a
foreign country or postal error; (3) the use of 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 1 was due to her mental condition following the sudden death of her
spouse, Decedent B, which impaired her ability to make financial decisions.

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Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement for the distribution of Amount 1 from IRA
C. Taxpayer A is granted a period of 60 days from the issuance of this ruling
letter to contribute a sum up to Amount 1 into an IRA established in your own
name. 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 1 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 transactions described
herein under the provisions of any other section of either the Code or regulations,
which may be applicable thereto.

This ruling does not authorize the rollover of amounts that are required to be
distributed by section 401(a)(9) of the Code.

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 is being sent to your authorized representative in accordance
with a Power of Attorney (Form 2848) on file with this office.

If you wish to inquire about this ruling, please contact (ID Number
) at ( . Please address all correspondence to
SE:T:EP:RA:T:1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Deleted copy of letter ruling
Notice of Intention to Disclose, Notice 437

cc: