Medical condition justifies late rollover of two IRA distributions

Plain-English summary

A taxpayer withdrew funds from two IRAs after certificates of deposit matured and, following a bank representative's advice, placed the combined amount in a money market account. A medical condition prevented him from understanding the nature of an IRA and the need to complete a rollover within 60 days. The IRS found that medical documentation supported his explanation and waived the deadline under IRC § 408(d)(3)(I). It gave him 60 days from the ruling letter to contribute the combined amount to an IRA or other eligible retirement plan, provided all other rollover requirements were met.

Ruling snapshot

• Question: Could a medical condition excuse the late rollover of distributions from two IRAs?
• Outcome: Approved, with 60 days from the ruling letter to complete the rollover
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

201447056

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 26 2014

Uniform Issue List: 408:03:00

T:EP:RA:T3

Legend:

Taxpayer: =

IRA X =

IRA Y =

Financial Institution A =

Amount A =

Amount B =

Amount C =

Dear ,

This is in response to your request, dated July 25, 2013, as supplemented by
correspondence dated April 9, 2014, May 26, 2014 and July 30, 2014, in which your
authorized representative, on your behalf, 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 represents that on April 22, 2013, he received distributions from IRA X
of Amount A, and from IRA Y of Amount B. Taxpayer asserts that his failure to
accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the

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Code was due to his medical condition which impaired his ability to accomplish a timely
rollover. Taxpayer further represents that Amount A and Amount B have not been used
for any purpose.

Taxpayer maintained IRA X and IRA Y at Financial Institution A. Both IRAs held
Certificates of Deposit which matured on April 20, 2013. Taxpayer received a notice
from the bank as to the maturity; and on April 22, 2013, he went to Financial Institution
A. On the advice of the representative from Financial Institution A, Taxpayer withdrew
Amount A and Amount B and deposited the total, Amount C, into a money market
account at Financial Institution A. Taxpayer suffers from a medical condition that
prevents him from comprehending the nature of an IRA and the necessity that the
amounts be rolled over to another IRA within 60 days.

Based on the facts and representations, you request a ruling that the Internal
Revenue Service (the “Service”) waive the 60-day rollover requirement contained in
section 408(d)(3) of the Code with respect to the distribution of Amount A and Amount
B.

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 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) of the Code).

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

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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) of the Code do not apply to any amount required to be distributed under section
408(a)(6) of the Code.

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, including
documentation from his family physician, are consistent with his assertion that his failure
to accomplish a timely rollover was caused by his mental condition which impaired his
ability to accomplish a timely rollover.

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 and Amount B from IRA Y. Taxpayer is granted a period of 60 days from the
issuance of this ruling letter to contribute Amount C into an IRA or other eligible
retirement plan. 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 C 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 transaction described in
this ruling under the provisions of any other section of either the Code or regulations
which may be applicable.

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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.

Pursuant to a power of attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

If you wish to inquire about this ruling, please contact *. Please address all
correspondence to SE:T:EP:RA:T2

Sincerely yours,

Jason E. Levine, Manager,
Employee Plans Technical Group 2

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose

cc: