Care for ill spouse justifies late IRA rollover waiver

Plain-English summary

A taxpayer received an IRA distribution intending to roll it into a new IRA, but deposited the check in a bank account instead. During the 60-day rollover period, the taxpayer's spouse became seriously ill and required extensive care from the taxpayer. Medical records supported the explanation, and the distributed amount had not been used for another purpose. The IRS found that the missed deadline resulted from circumstances beyond the taxpayer's reasonable control and waived the 60-day requirement. It gave the taxpayer another 60 days to complete the rollover, but did not authorize rollover of any required minimum distribution.

Ruling snapshot

• Question: Could the taxpayer receive a waiver after missing the IRA rollover deadline while caring for a seriously ill spouse?
• Outcome: Approved, with 60 days from the ruling date to complete the rollover
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

201447060

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 11 2014

Uniform Issue List: 408.03-00

Legend:

Taxpayer: = ***

IRA: = ***
***
***

Amount: = ***

Dear ***:

This is in response to your request dated November 12, 2013, as
supplemented by correspondence dated June 12, 2014, 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

Taxpayer represents that he received a distribution from IRA totaling
Amount. Taxpayer 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 Taxpayer
providing care for his spouse whose serious medical condition arose during the
60-day rollover period. Taxpayer further represents that Amount has not been
used for any other purpose.

2 201447060

Taxpayer received a distribution from IRA on August 20, 2013, with the
intent to roll it over within 60 days into a new IRA. On August 26, 2013, Taxpayer
deposited a check from IRA dated August 20, 2013, of Amount into his checking
account.

During the 60-day rollover period, Taxpayer’s spouse became ill and
required extensive care, which Taxpayer provided. Taxpayer asserts that
because he had to care for his spouse, he failed to rollover Amount into an IRA
within 60 days. Taxpayer has submitted spouse’s medical records which
document his spouse's illness.

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.

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 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.

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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. 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 documentation submitted by Taxpayer,
including documentation submitted by Taxpayer's spouse's treating physician is
consistent with his assertion that his failure to accomplish a timely rollover was
due to Taxpayer providing care with respect to his spouse’s medical condition
during the 60-day rollover period.

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 from IRA. Taxpayer is granted a period of 60 days from the issuance of
this ruling letter to contribute Amount 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 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.

4 201447060

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.

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.

If you have any questions, please contact **** at () -
**. 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