Caregiving and incomplete advice support an IRA rollover waiver

Plain-English summary

A taxpayer withdrew funds from two IRAs and tried to reinvest them through a trust, believing the transaction would remain an IRA rollover. He missed the 60-day deadline after receiving incomplete information from his CPA and becoming occupied with caring for his terminally ill wife. The IRS found the submitted information and documentation consistent with that explanation. It waived the deadline under section 408(d)(3)(I) and gave the taxpayer 60 days from the ruling letter to contribute both amounts to a rollover IRA. The relief applied only if all other rollover requirements were satisfied and did not cover any required minimum distribution.

Ruling snapshot

• Question: Should the IRS waive the 60-day deadline for rolling distributions from two IRAs into another IRA?
• Outcome: Approved, with 60 days from the ruling letter to complete the rollover
• Key authorities: IRC §§ 408(d)(3)(A), (D), (E), and (I); Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 02 2014

Uniform Issue List: 408.03-00

T:EP:RA:T3

Legend:
Taxpayer:

IRA X:

IRA Y:

CPA:
Professional Corporation:

Trust:

Amount K:

Amount L:

Dear :

This is in response to letters dated October 17, 2013, March 3, 2014, and June 23, 2014, submitted by your authorized representative on your behalf, 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”).

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The following facts and representations have been submitted under penalty of perjury in support of the ruling requested.

Taxpayer maintained IRA X and IRA Y. Taxpayer asserts that he received distributions of Amount K from IRA X and Amount L from IRA Y. Taxpayer asserts that his failure to rollover these amounts within the 60-day period prescribed by section 408(d)(3) of the Code was due to incomplete information provided by his CPA and by Taxpayer being occupied with the care of his terminally ill wife. Taxpayer further represents that Amount K and Amount L have not been used for any purpose other than as an intended IRA rollover.

Taxpayer’s wife was diagnosed with a terminal illness in 2010. Taxpayer asserts that his wife’s illness motivated him to secure his IRA in a more stable investment. Accordingly, Taxpayer consulted with CPA of Professional Corporation, received confirmation that the proposed investment was an approved investment vehicle for his IRA assets, and was told that he would not be subject to “IRS taxes” since he was younger than age 59 1/2 and if he processed the rollover properly.

In his distracted state, Taxpayer mistook this information as confirmation that the investment vehicle and final transaction would continue as an IRA with follow-up tax compliance by Professional Corporation. Taxpayer relied on Professional Corporation for all financial advice the previous 17 years and completed other transfers involving his IRA after obtaining prior approval from Professional Corporation. Your submission includes a statement from Professional Corporation wherein it represents that Taxpayer relied on its advice and that Taxpayer was “fully convinced” that the attempted transaction was a valid rollover.

On August 25, 2011, Taxpayer took distributions from IRA X in Amount K and Amount L from IRA Y. These funds were invested in Trust on August 31, 2011, in an attempt to complete an IRA rollover of Amounts K and L. However, Taxpayer asserts that, during this time, he was no longer able to properly concentrate on financial matters because his wife’s condition worsened and he became a full- time care giver for her. Accordingly, Taxpayer did not become aware that the investment was not a valid rollover until he received a letter from the Internal Revenue Service ( the “Service”) informing Taxpayer that he failed to report the distribution of Amounts K and L as IRA distributions.

Based on the facts and representations, you request a ruling that the Service waive the 60-day rollover requirement contained in section 408(d)(3) of the Code with respect to the distributions of Amount K from IRA X and of Amount L from IRA Y.

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

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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 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.

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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 his assertion that his failure to accomplish a timely rollover of Amount K and Amount L was caused by the incomplete information provided by CPA and his being occupied with the care of his terminally ill wife.

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 K from IRA X and Amount L from IRA Y. Taxpayer is granted a period ending 60 days from the issuance of this ruling letter to contribute Amount K and Amount L 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, the contribution 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.

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

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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: