Bereaved taxpayer receives a waiver for a late IRA rollover

Plain-English summary

A taxpayer received a distribution from his deceased wife’s IRA but did not complete the rollover within 60 days. His father had died three days before his wife, and his mother died six days after the IRA distribution. During and after the rollover period, the taxpayer was managing his wife’s and father’s estates and his mother’s medical care. The funds remained in non-interest-bearing and checking accounts before the taxpayer deposited the distributed amount into another IRA. The IRS found the documentation consistent with extreme emotional distress caused by the three deaths and waived the 60-day deadline under section 408(d)(3)(I). The waiver applied only if all other rollover requirements were met and did not authorize rollover of a required minimum distribution.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover deadline after the deaths of his wife, father, and mother?
• Outcome: Approved
• Key authorities: IRC §§ 401(a)(9) and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

TAX EXEMPT

AND

GOVERNMENT ENTITIES

DIVISION

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201510062

WASHINGTON, D.C. 20224

DEC 10 2014

SE:T:EP:RA:T3

U.I.L. 408.03-00

XXXXXKXXXKXXKXXXXXXXXXXXXK
XXXXXXXXXXXXXXXAXKXKXXXX
XXXXXXXXXXXXKXXXXKXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXX

Individual M = XXXXXXXXXXXXXX

IRA X = XXXXXXXXXXXXXX

Bank B = XXXXXXXXXXXXXX
Bank E = XXXXXXXXXXXXXX
Amount C = XXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXX
Amount F = XXXXXXXXXXXXXX

Account G = XXXXXXXXXXXXXX

IRA Y = XXXXXXXXXXXXX

Date 1 = XXXXXXXXXXXXX
Date 2 = XXXXXXXXXXXXX

Date 3 = XXXXXXXXXXXXXX

Date 4 = XXXXXXXXXXXXXX

Date 5 = XXXXXXXXXXXXXX
Date 6 = XXXXXXXXXXXXXX
Date 7 = XXXXXXXXXXXXXX

Dear XxXXXXXXXxX:

This is in response to your letter dated June 23, 2014, as supplemented by
correspondence dated September 17, 2014, and September 30, 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 your request.

Taxpayer A represents that he received a distribution from IRA X totaling Amount
D. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day
period prescribed by section 408(d)(3) was due to his extreme emotional distress
caused by the death of his father, wife, and mother.

Taxpayer A represents that on Date 2, his wife, Individual M, passed away.
Taxpayer A further represents that following the death of his wife, he attended
the funeral of his father who passed away on Date 1, three days prior to Date 2.

On Date 3, Taxpayer A received and deposited a distribution from Individual M's
IRA X totaling Amount D into a non-interest bearing account with Bank B. Six
days after the distribution, Taxpayer A’s mother passed away on Date 4. On Date
5, Taxpayer A issued a check from Bank B totaling Amount C payable to himself
and deposited it into his checking account with Bank E. Taxpayer A represents
that funds remained with Bank E until Date 6 at which time Amount F was
transferred to Account G with Bank E. Subsequently, on Date 7, Taxpayer A
deposited Amount D into IRA Y.

During and following the 60-day period, Taxpayer A’s full attention was to
managing the estates of his wife and father and the medical care for his mother
prior to her death which occurred within the 60-day rollover period.

201510062

Based on the facts and representations, Taxpayer A requests that the Internal
Revenue Service (the Service) waive the 60-day rollover requirement with
respect to Amount D.

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 received 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 included 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).

201510062

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 and good
conscience, including casualty, disaster, or other events beyond the reasonable
control of the individual subject to such requirement. Only distributions that occur
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, 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, or 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 A is
consistent with his assertion that his failure to accomplish a timely rollover was
due to his extreme emotional distress caused by the death of his father, wife and
mother.

Therefore, pursuant to Code section 408(d)(3)(I), the Service hereby waives the
60-day rollover requirement with respect to the distribution of Amount D from IRA
X. Provided all other requirements of section 408(d)(3) of the Code, except the
60-day requirement, were met with respect to such contribution, the contribution
of Amount D into 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 thereto.

This letter is directed only to the taxpayer that requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

5

201510062

A copy of this letter is being sent to your authorized representative pursuant to a
Power of Attorney on file with this office.

If you have any questions regarding this letter, please contact xxxxxxxxxx, at
XXXXXXXXXXXXX. All correspondence should be addressed to SE:T:EP:RA:T:3.

Sincerely yours,

[illegible]
Laura B. Warshawsky, Manager

Employee Plans Technical Group 3
Enclosures:

Deleted copy of letter ruling
Notice of Intention to Disclose

cc:
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