IRS waives the rollover deadline after a taxpayer cared for an ill spouse

Plain-English summary

An individual asked the IRS to waive the 60-day deadline for rolling an IRA distribution into a traditional IRA. During the rollover period, the individual's husband became seriously ill and bedridden. The individual became his full-time caregiver and missed the deadline while looking for a new financial institution. The IRS accepted the medical circumstances and supporting disability documentation as the reason for the delay. 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 the taxpayer missed the deadline while caring for a seriously ill spouse?
• 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)

201403023

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00
OCT 21 2013

T:EP:RA:T3

Legend:
Taxpayer A:
Individual B:

IRA X:

Amount M:

Insurance Company M:

Dear

This is in response to your request dated February 5, 2013, 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:

Taxpayer A represents that she received a distribution from IRA X totaling Amount M.
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 Taxpayer A’s involvement with
the medical condition of her husband, Individual B. Taxpayer A further represents that
Amount M has not been used for any other purpose.

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

On August 31, 2011, Taxpayer A took a distribution of Amount M from IRA X with the
intent to roll the funds into a traditional Individual Retirement Account (IRA) with a new
financial institution. During the 60-day rollover period, while Taxpayer A and Individual B
were in the midst of searching for a new financial institution, Individual B became
seriously ill and bedridden. Individual B was not able to function in a normal way during
this time and Taxpayer A became his full-time care giver. The care-giving activity
caused Taxpayer A to miss the 60-day rollover period.

Taxpayer A has submitted letters from attending physicians, attesting to Individual B’s
serious illness and disability during the 60-day period, a letter from Insurance Company
M stating Individual B had been approved for disability on October 24, 2011, and a letter
from the Social Security Administration stating that Individual B is entitled to disability
benefits beginning in April of 2012.

Based on the 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 the distribution of 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.

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) 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 was caused by her involvement with the medical condition of her husband, Individual B.

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 X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount M to 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 valid 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, 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

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