Family medical crises justify IRA rollover waiver

Plain-English summary

An IRA owner took a distribution to pay for his mother-in-law's medical treatment outside the United States. She died during the 60-day rollover period before he used the full distribution, and his own mother's rapidly declining health then required his care. He did not attend to his finances during these family crises and deposited the unused amount back into the IRA after the deadline. The IRS found that his information and documentation supported his account of the disruption and waived the 60-day deadline for the unused amount. The waiver applied only if all other rollover requirements were met and did not authorize rollover of any required minimum distribution.

Ruling snapshot

• Question: Should the IRS waive the 60-day IRA rollover deadline when deaths and serious family health problems disrupted the taxpayer's life?
• Outcome: Approved, subject to all other rollover requirements
• Key authorities: IRC §§ 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

201506013

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 13 2014

Uniform Issue List: 408.03-00

SE:T:EP:RA:T2

Legend:
Taxpayer =

IRA =

Amount A =

Amount B =

Dear

This is in response to a letter dated September 16, 2013, as
supplemented by a letter dated September 25, 2014, submitted on your behalf by
your authorized representative, 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 A. Taxpayer asserts that his failure to complete a rollover of Amount B
within the 60-day period prescribed by section 408(d)(3) of the Code was due to
the significant disruption of his life at that time due to the death of his mother-in-
law, and his caring for his mother due to her rapidly declining health. Taxpayer
further represents that Amount B has not been used for any other purpose.

On September 24, 2012, Taxpayer received a distribution of Amount A
from IRA to pay for his mother-in-law’s medical treatment outside the US.

201506013

Page 2

Taxpayer's mother-in-law passed away during the 60-day period before
Taxpayer used all of Amount A. Taxpayer could have rolled over the remainder,
Amount B, except that during the 60-day period his mother’s health declined,
requiring him to care for her. Taxpayer failed to attend to his finances because of
the death of his mother-in-law and his obligation to care for his mother due to her
debilitating medical condition. Taxpayer has submitted documentation supporting
his assertions of events during the 60-day period. Taxpayer deposited Amount B
into IRA after the 60-day period expired.

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 B.

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.

Page 3 201506013

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 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 is
consistent with his assertion that his failure to accomplish a timely rollover was
due to the significant disruption of his life during the rollover period caused by the
death of his mother-in-law and his obligation to care for his mother arising from
her rapidly declining health.

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 B from IRA. Provided all other requirements of section 408(d)(3) of the
Code, except the 60-day requirement, were met with respect to the contribution
of Amount B to IRA, such contribution will be considered a valid 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.

201506013

Page 4

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

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

cc