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: