Caregiving crisis excuses missed IRA rollover deadline

Plain-English summary

A taxpayer received an IRA distribution while serving as the primary caregiver for her seriously ill husband, who had always managed the couple's financial affairs. She deposited the funds into a savings account that she believed was an IRA and later moved the money through another savings account before learning that the rollover had not been completed properly. After discovering the mistake, she transferred the distributed amount into a new IRA. The IRS found that her husband's medical condition and her caregiving duties caused the missed deadline and waived the 60-day requirement under IRC § 408(d)(3)(I). The ruling treated the transfer to the new IRA as a valid rollover if all other requirements were met, but did not permit rollover of required distributions under IRC § 401(a)(9).

Ruling snapshot

• Question: Could the taxpayer receive a rollover waiver after caregiving for her ill husband caused her to place an IRA distribution in non-IRA accounts?
• Outcome: Approved, with the completed transfer treated as a rollover if all other requirements were met
• Key authorities: IRC §§ 72, 401(a)(9), and 408(d)(3); 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 30 2014

Uniform Issue List: 408.03-00

Legend:
Taxpayer =

IRA X =
IRA Y =

Amount A =
Amount B =

Amount C =

Financial Institution A =
Financial Institution B =
Financial Institution C =

Dear ,

This is in response to your request dated May 28, 2013, supplemented by
correspondence dated November 11, 2013, and September 25, 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 she received a distribution of Amount A from
IRA X. She further represents that her failure to accomplish a rollover within the
60-day period prescribed by section 408(d)(3) of the Code was due to the
medical condition of her husband, for whom she was the primary caregiver, and
who had always managed their financial affairs. Taxpayer further represents that
the amount distributed has not been used for any purpose.

At the time of the distribution, on November 19, 2012, and during the
rollover period, Taxpayer was preoccupied with the care of her husband. Her
husband required frequent doctor visits and constant attention at home.
Taxpayer has provided documentation from her husband’s attending physician
attesting to his medical condition. Additionally, Taxpayer had never been
involved with the couple’s financial affairs.

Taxpayer's intent was to move the IRA to a bank that was closer to her
home. On November 26, 2012, Taxpayer deposited Amount A to her savings
account with Financial Institution B. Taxpayer represents that she believed the
account was an IRA. On April 2, 2013, Taxpayer met with her financial adviser
and on his advice, withdrew Amount B from her account at Financial Institution B.
She deposited this amount into her savings account with Financial Institution C.

On April 5, 2013, Taxpayer learned that the distribution from IRA X had
not been properly rolled over. On April 11, 2013, Taxpayer transferred Amount C
to IRA Y. On April 15, 2013, Taxpayer transferred Amount B from her savings

account at Financial Institution C to IRA Y.

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.

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) or 408(b)(3).

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), 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 her husband’s attending physician, are consistent
with her assertion that her failure to accomplish a timely rollover was caused by a
medical condition of her husband and her duties as his primary caregiver.

Taxpayer has provided documentation from her husband's attending physician
attesting to his medical condition.

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. Provided all the other requirements of Code section 408(d)(3),
except the 60-day requirement, are met with respect to such contribution, the
transfer of Amount A to IRA Y 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.

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.

A copy of this letter has been sent to your authorized representative in
accordance with a power of attorney on file with this office.

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

Sincerely,

Jason E. Levine, Manager
Employee Plans Technical Group 2

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

CC: