Widow receives waiver for late rollover of part of husband's IRA distribution

Plain-English summary

A deceased IRA owner's account was canceled after the issuer learned of his death, and the proceeds were paid to his estate. His widow, the named beneficiary and estate representative, used part of the distribution for funeral expenses and placed the remaining amount into an annuity intending to complete a rollover. The IRS found that her failure to meet the original 60-day deadline was caused by her husband's death, an event beyond her reasonable control. It waived the deadline for the amount placed into the annuity and gave her 60 days from the ruling date to contribute that amount to an IRA or other eligible retirement plan. The ruling did not permit rollover of any amount required to be distributed under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the widow receive a waiver of the 60-day rollover deadline for the remaining IRA distribution?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201451066

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION SEP 25 2014

Uniform Issue List: 408.00-00

T:EP:RA:T3

Legend:

Taxpayer =
Amount M =
Amount N =

Plan =

Decedent =
Company =
Life Insurance Company =

IRA =

Annuity =

Court =

2

201451066

Dear

This is in response to your letter dated December 11, 2012, as
supplemented by your letter dated December 30, 2013, concerning a distribution
from an annuity purchased by your deceased husband, in which you are the
named beneficiary, and the proper rollover treatment of the distribution from the
annuity under 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.

Decedent maintained IRA. Taxpayer asserts that Decedent's estate
received Amount M from IRA. Taxpayer asserts that the failure to complete a
rollover of Amount M within the 60-day period prescribed by section 408(d)(3) of
the Code was due to Decedent’s death. Taxpayer further represents that Amount
M has not been used for any other purpose.

Decedent was married to Taxpayer at the time of his death on September
24, 2012. Decedent was employed by Company, the sponsor of Plan. On July
17, 2012, Decedent elected to roll over his lump sum distribution from Plan into
IRA. Decedent named Taxpayer as the primary beneficiary. On September 5,
2012, IRA was issued by Life Insurance Company. Life Insurance Company
cancelled IRA on October 29, 2012, after learning Decedent had died and issued
a check payable to the Estate of Decedent. Taxpayer received a letter of
appointment of personal representative of the Estate of Decedent on November
13, 2012, from Court.

On November 19, 2012, Taxpayer purchased Annuity with Amount N, after
using part of Amount M for funeral expenses, with the intent to complete the
rollover of Amount N. Life Insurance Company informed Taxpayer that a ruling
letter from the Internal Revenue Service granting a waiver of the 60-day rollover
period would be required.

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 N from IRA.

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.

3

201451066

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)(C)(i) of the Code provides, in summary, that the rollover
rules of section 408(d)(3) do not apply to inherited IRAs.

Section 408(d)(3)(C)(ii) of the Code provides that the term "inherited IRA"
means an IRA obtained by an individual, other than the IRA owner's spouse, as a
result of the death of the IRA owner.

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

4

201451066

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 documentation submitted by Taxpayer is
consistent with her assertion that the failure to accomplish a timely rollover was
due to the death of Decedent.

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

5

201451066

If you have any questions, 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