Medical impairment supports waiver of 60-day IRA rollover deadline

Plain-English summary

The IRS waived the 60-day IRA rollover deadline for a taxpayer whose bipolar disorder and resulting depression impaired his ability to manage his financial affairs during the rollover period. The taxpayer withdrew funds to consolidate his accounts, completed the rollover after the deadline, and represented that the money had not been used for another purpose. A psychiatrist's letter supported the medical explanation. Subject to all other rollover requirements being met, the contribution was treated as a valid rollover.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover deadline because a medical condition prevented timely financial management?
• Outcome: Approved. The IRS waived the deadline, subject to satisfaction of the other IRC § 408(d)(3) requirements.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
201420027

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
FEB 19 2014

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:

Taxpayer A =
IRA B =
Financial Institution C =
Financial Institution D =
IRA E =

Amount 1 =

Dear
:

This letter is in response to your request dated November 5, 2013, as supplemented by correspondence dated November 26, 2013, from your authorized representative, in which you have 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 he took a distribution of Amount 1 from

IRA B. Taxpayer A asserts that his failure to accomplish a rollover of Amount 1 within the 60-day period prescribed by Code section 408(d)(3) was due to his medical condition which impaired his ability to manage his financial affairs. Taxpayer A further represents that Amount 1 has not been used for any other purpose.

2
201420027

Taxpayer A maintained IRA B, an individual retirement account (IRA) under section 408 of the Code. Taxpayer A represents that, on April 19, 2011, in order to consolidate his accounts and simplify his life, he closed IRA B by withdrawing Amount 1. Taxpayer A intended to transfer Amount 1 to an IRA at Financial Institution D where he maintained his checking account, several certificates of deposit and a safety deposit box. On July 12, 2011, after the 60-day rollover period, Taxpayer A completed the rollover by opening IRA E at Financial Institution D. While accepting the rollover, a manager at Financial Institution D informed Taxpayer A that his 60-day rollover deadline had expired.

Taxpayer A represents that he has been diagnosed with bipolar disorder and receives social security disability as a result of this diagnosis. During the 60-day rollover period, Taxpayer A experienced depression which prevented him from properly managing his financial affairs. The ruling request is supported by a letter from his psychiatrist that explains Taxpayer A’s medical condition and the medications he was taking during this 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 the distribution of Amount 1.

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

3
201420027

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 the documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish a timely rollover of Amount 1 was due to his medical condition which impaired his ability to manage his financial affairs.

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 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's contribution of Amount 1 into IRA D, on July 12, 2011, such contribution will be considered a rollover contribution within the meaning of section 408(d)(3).

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

4
201420027

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: