IRS waives a 60-day IRA rollover deadline after medical emergencies

Plain-English summary

An IRA owner missed the 60-day rollover deadline while recovering from surgery and caring for her daughter after a serious accident. She deposited the distribution into the IRA nine days after the deadline and had not used the money for another purpose. The IRS waived the deadline and treated the contribution as a rollover, assuming the other rollover requirements were met. The ruling did not authorize the rollover of amounts required to be distributed under section 408(a)(6).

Ruling snapshot

• Question: Can the taxpayer's late IRA contribution qualify as a rollover after medical circumstances caused a nine-day delay?
• Outcome: Approved, the 60-day requirement was waived.
• Key authorities: IRC §§ 72, 401, 408, and 6110; Rev. Proc. 2003-16

Full text (IRS public release)

201407030

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 21 2013

[illegible handwritten notation]

Uniform Issue List: 408.03-00

Legend:

Taxpayer A =

IRA B =

Financial
Institution C =

Individual D =

Amount 1 =

Dear :

This is in response to a request for a private letter ruling dated July 11, 2013, as supplemented by correspondence dated August 8, and September 16, 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:

Taxpayer A represents that she received a distribution of Amount 1 from IRA B. 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 the combined effect of her and her daughter's, Individual D, medical conditions and related issues which impaired her ability to manage her financial affairs. Taxpayer A further represents that Amount 1 has not been used for any other purpose and that Amount 1 was deposited into IRA B on March 28, 2011.

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2

Taxpayer A maintained IRA B, an individual retirement account (IRA) under section 408(a) of the Code, with Financial Institution C. On January 18, 2011, Taxpayer A took a distribution of Amount 1 from IRA B. Taxpayer A represents that she intended to roll over Amount 1 to IRA B within the 60-day rollover period but, at the time of the distribution, Taxpayer A experienced complications from surgery which occurred on December 10, 2010. Taxpayer A had limited mobility and required physical therapy. Such condition persisted into April, 2011.

In addition, on February 20, 2011 during the rollover period (January 18, 2011 to March 19, 2011) Individual D was in a serious accident which required hospitalization and follow-up surgery. Taxpayer A spent much of her time during the rollover period caring for herself and Individual D. As a result, Taxpayer A did not roll over Amount 1 into IRA B until March 29, 2011, which was nine days beyond the rollover period. The ruling request is accompanied by physician and hospital documents which describe the medical conditions of Taxpayer A and Individual D.

Taxpayer A represents that she was under extreme stress resulting from her medical condition and that of Individual D which impaired her ability to manage her financial affairs during the 60-day rollover period.

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 Amount 1.

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 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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3

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code does not apply to any amount described in section 408(d)(3)(A)(i) of the Code 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) of the Code from an IRA which was not includible in gross income because of the application of section 408(d)(3) of the Code.

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) 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 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 the combined effect of the medical conditions of herself and Individual D and related issues which impaired her ability to manage her financial affairs during the 60-day rollover period.

Therefore, pursuant to section 408(d)(3) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount 1 from IRA B. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, were met with respect to Taxpayer A’s contribution of Amount 1 into IRA B on March 28,2011, such contribution will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

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4

This ruling does not authorize the rollover of amounts that are required to be distributed by section 408(a)(6) 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 ( ).

Sincerely yours,

Carlton A. Watkins
Manager
Employee Plans Technical Group 1

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

CC: