IRS waives the rollover deadline after a caregiver missed it while managing dementia-related affairs

Plain-English summary

An individual acting under a durable power of attorney asked the IRS to waive the 60-day deadline for rolling over a distribution from his wife's IRA. The wife had dementia, was entering assisted living, and was hospitalized during the week the distribution was made. The spouse moved the funds into a joint checking account and later into a mutual fund account, but did not complete the rollover while caring for her. The IRS accepted the wife's illness and the spouse's caregiving responsibilities as circumstances beyond his reasonable control. It waived the deadline under IRC § 408(d)(3)(I) and allowed 60 days from the ruling letter to contribute the amount to a rollover IRA. The ruling did not authorize rollover of amounts required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement when a spouse missed the deadline while caring for an ill wife?
• Outcome: Approved.
• Key authorities: IRC §§ 72, 401(a)(9), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

201403022

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
OCT 21 2013
Uniform Issue List: 408.03-00

T:EP:RA:T3
Legend:
Taxpayer A: ***
Individual B: ***
IRA X: ***
Amount A: $ ***
Amount B: $ ***
Financial Institution F: ***
Dear ***:
This letter is in response to a request dated January 20, 2013, and supplemented by correspondence dated June 3, 2013, and June 6, 2013, in which you requested 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, with the assistance of her spouse and Durable Power of Attorney, Individual B, received a distribution from IRA X totaling Amount A. Individual B asserts that the failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to Individual B’s involvement with the medical condition of his wife. Individual B further represents that Amount A has not been used for any other purpose.

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Taxpayer A suffered from dementia and was unable to manage her own financial affairs. During the week of August 13, 2012, Taxpayer A asked Individual B to withdraw Amount A from IRA X because she feared that her IRA would be taken away from her in the assisted living facility she was about to enter. During that same week, Taxpayer A was admitted to the hospital.
Individual B, acting on behalf of Taxpayer A, withdrew Amount A from IRA X and transferred the funds to Taxpayer A and Individual B’s joint checking account with Financial Institution F. Financial Institution F processed the distribution on August 20, 2012. As part of the distribution, Financial Institution F withheld Amount B for Federal Income Tax purposes.
Thereafter, on October 1st and 5th of 2012, Individual B transferred the funds into Individual B’s mutual fund account where they remain.
Individual B asserts that the failure to accomplish the rollover within the required 60-day rollover period was due to the fact that, as Taxpayer A’s caregiver, he was so consumed with Taxpayer A’s health situation that he was unable to take advantage of the 60-day rollover period. Taxpayer A passed away on November 25, 2012 while being cared for in an assisted living facility. Individual B has submitted documentation evidencing his wife’s illness during the 60-day period.
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 Individual Retirement Account (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)).
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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 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 Individual B is consistent with his assertion that the failure to accomplish a timely rollover on his wife’s behalf was due to Individual B’s involvement with the medical condition of his wife.
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. Individual B is granted a period of 60 days from the issuance of this ruling letter to contribute Amount A 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 of Amount A will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.
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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.
If you wish to inquire about this ruling, please contact *** (ID# ) at . 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