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)

201509066

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”).

201509066

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.

5 201509066

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: