Deteriorating vision supports waiver of IRA rollover deadline

Plain-English summary

An IRA trustee resigned and closed an individual's IRA, issuing the account balance directly to her. At the time, deteriorating vision prevented her from understanding the tax consequences and completing the direct rollover recommended by the bank. She deposited the money into an existing non-IRA account, where it remained, and was placed on disability by her employer shortly after the rollover deadline. The IRS found that her medical condition caused the missed deadline and waived the 60-day rollover requirement. It granted another 60 days to place the amount in a rollover IRA, subject to the other rollover requirements and the rule barring rollover of required distributions.

Ruling snapshot

• Question: Could the individual receive a waiver after deteriorating vision impaired her ability to complete an IRA rollover?
• Outcome: Approved, with 60 days to complete the rollover
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 15 2014

201450034

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXX
IRA B = XXXXXXXXXXXXX
Bank C = XXXXXXXXXXXXX
Account D = XXXXXXXXXXXXX
Bank E = XXXXXXXXXXXXX
Amount 1 = XXXXXXXXXXXXX

Dear XXXXXXXXXXXXX:

This is in response to your request dated April 6, 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 A represents that she received a distribution from IRA B totaling Amount 1.
Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3) was due her medical condition which impaired her
ability to accomplish a timely rollover.

Taxpayer A owned IRA B, which was maintained by Bank C. Due to Bank C resigning
as an IRA trustee, IRA B was closed by Bank C, and on September 6, 2013,
distributions totaling Amount 1 were issued to Taxpayer A. During this period, Taxpayer
A was suffering from increasingly poor vision which prevented her from understanding
the tax consequences of the closing of her IRA and completing a direct rollover as
recommended by Bank C. Taxpayer A deposited Amount 1 in her existing non-IRA

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Account D with Bank E. Also during this period, Taxpayer A was facing termination
from her job as the result of her medical condition. Taxpayer A was placed on disability
from her employer on November 21, 2013, just after the end of the 60-day rollover
period. Amount 1 remains in Account D with Bank E.

Based on 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 in this instance 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 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

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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 documentation submitted by Taxpayer A is consistent
with her assertion that her failure to accomplish a timely rollover was caused by her
deteriorating medical condition which impaired her ability to accomplish a timely
rollover.

Therefore, pursuant to section 408(d)(3)(B) of the Code, the Service hereby waives the
60-day rollover requirement with respect to the distribution of Amount 1 from IRA B.
Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount 1 into a Rollover IRA. Provided all other requirements of section
408(d)(3) of the Code, except the 60-day requirement, are met with respect to such
contribution, Amount 1 will be considered a rollover contribution within the meaning of
section 408(d)(3).

This ruling does not authorize the rollover of amounts that are required to be distributed
by section 408(a)(6) of the Code.

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 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 wish to inquire about this ruling, please contact XXXXXXXXXXX (ID XXXXXXXX)
at (XXX) XXX-XXXX. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,

Carlton Watkins, Manager
Employee Plans Technical Group 1

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