IRS waives the 60-day IRA rollover requirement after a medical emergency

Plain-English summary

The IRS waived the 60-day deadline for a taxpayer who received an IRA distribution while recovering from serious injuries. The taxpayer broke both ankles, underwent surgery, developed a blood clot, and could not complete the rollover personally. A niece authorized to handle the taxpayer's financial affairs tried to open a rollover IRA, but the bank required the taxpayer to be present, and the taxpayer could not leave the hospital bed. Because the funds remained in the taxpayer's checking account and were not used for another purpose, the IRS granted relief under IRC § 408(d)(3)(I).

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day deadline for rolling the IRA distribution into a rollover IRA?
• Outcome: Approved, the 60-day rollover requirement was waived
• Key authorities: IRC §§ 408(d)(1), 408(d)(3), 408(d)(3)(I), 401(a)(9), 72, and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201409016

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
DEC 04 2013
U.I.L. 408.03-00
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXKX
Legend:
Taxpayer A = XXXXXXXXXXXXXXX
Individual B = XXXXXXXXXXXXXXX
IRA X = XXXXXXXXXXXXXXX
Bank F = XXXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXX
State S = XXXXXXXXXXXXXXX
State T = XXXXXXXXXXXXXX

Dear Xxxxxxx:

This letter is in response to your request dated August 19, 2013, as supplemented by correspondence dated October 28, 2013, and November 21, 2013, 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.

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Taxpayer A represents that he received a distribution from IRA X totaling Amount D. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to his medical condition.

Taxpayer A lived alone in State T. Taxpayer A fell in his home on April 8, 2013, and broke both ankles and as a result surgery was performed on April 9, 2013. He was unable to stand up, walk, or drive a car and was confined to a hospital bed. Taxpayer A later developed a blood clot in his leg, extending further his bed confinement.

Taxpayer A states that because of his physical condition he was unable to live alone and moved to State S to live with Individual B, his niece. On April 12, 2013, Taxpayer A empowered Individual B, to handle his financial affairs and to withdraw all the funds in IRA X and rollover the funds to a bank in State S.

During the 60-day rollover period, Individual B went to open a rollover IRA with Bank F, but Bank F told Individual B that Taxpayer A must be present to open an IRA even though she was empowered to handle his financial matters. Taxpayer A could not be present at that time due to his severe infirmities which confined him to a hospital bed. Medical documentation shows the severity of Taxpayer A’s medical condition during the 60-day rollover period. Amount D was deposited into Taxpayer A’s checking account and has not been used for any other purpose.

Based upon 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 D.

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 received the payment or distribution; or

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(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 included 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 occur 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, 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 Taxpayer A is consistent with his assertion that his failure to accomplish a timely rollover was due to his medical condition.

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 D. Taxpayer A is granted a period of 60 days from the issuance of this letter

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ruling to contribute Amount D into a rollover IRA. Provided all other requirements of Code section 408(d)(3), except the 60-day requirement, are met with respect to such contribution, the contribution of Amount D will 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.

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 is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

If you have any questions concerning this ruling, please contact xxxxxxxxxxxxx xxxxxxxxxxxxx. All correspondence should be addressed to SE:T:EP:RA:T3.

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3
Enclosures:
Deleted copy of letter ruling
Notice 437