Care for an ill parent justifies a late IRA rollover

Plain-English summary

A taxpayer withdrew an amount from her IRA intending to roll it over to another financial institution that offered a higher interest rate. During the 60-day rollover period, her mother was ill, and the taxpayer cared for her while also working seven days a week at the family business. The deadline passed, but the distribution check remained uncashed, and the original bank would not accept a late redeposit. The IRS concluded that the circumstances justified a waiver under section 408(d)(3)(I). It gave the taxpayer 60 days from issuance of the ruling to contribute the amount to a rollover IRA.

Ruling snapshot

• Question: Would illness-related caregiving and family-business duties justify waiving the 60-day IRA rollover deadline?
• Outcome: Approved
• Key authorities: IRC §§ 72 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

201511037

DEC 15 2014

T:EP:RA:T3

U.I.L. 408.03-00

XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXX

IRA X = XXXXXXXXXXXXXXX

Bank B = XXXXXXXXXXXXXXX

Amount D = XXXXXXXXXXXXXXX

Dear XXXXXXXXXX:

This is in response to your request dated June 20, 2014, as supplemented by
correspondence dated August 21, 2014, October 14, 2014, November 25, 2014,
and December 8, 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 A represents that she received a distribution from IRA X totaling
Amount D. Taxpayer A asserts 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 fact
that her mother was ill during the 60-day period, and as a result of that illness,
Taxpayer A was responsible for caring for her mother and for running the family
business.

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201511037

Taxpayer A maintained IRA X with Bank B. On June 14, 2013, Taxpayer A
withdrew Amount D from IRA X, with the intent to rollover Amount D within the
60-day period to another financial institution that was offering a higher rate of
interest.

Taxpayer A represents that she works seven days a week at a family-owned
business and also cares for her elderly mother. Taxpayer A represents that due
to her heavy workload and family obligations she inadvertently failed to rollover
Amount D during the 60-day rollover period.

Taxpayer A further represents that she attempted to redeposit Amount D into IRA
X. However, Bank B would not accept the redeposit of Amount D back into IRA X
because the 60-day time period had elapsed. The check representing the
distribution of Amount D from IRA X remains uncashed in Taxpayer A’s
possession.

Based upon the facts and representations, you request a ruling that the Internal
Revenue Service (Service) waive the 60-day rollover requirement contained in
section 408(d)(3) of the Code with respect to the distribution of 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)).

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201511037

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).

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 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, 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 is consistent with
Taxpayer A's assertion that her failure to complete a rollover of Amount D during
the 60-day period was due to the fact that her mother was ill during the 60-day
period, and as a result of that illness, Taxpayer A was responsible for caring for
her mother and for running the family business.

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
D. Taxpayer A is granted a period of 60 days from the issuance of this letter
ruling to contribute Amount D into a rollover IRA. Provided all other requirements
of Code section 408(d)(3), except the 60-day requirement, are met with respect
to such contribution, Amount D will be considered a rollover contribution within
the meaning of section 408(d)(3) of the Code.

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201511037

This ruling does not authorize the rollover of amounts that are required to be
distributed by section 408(a)(6) of the Code.

No opinion is expressed as to the tax treatment of the transactions described
herein under the provisions of any other section of either the Code or regulations,
which may be applicable thereto.

This ruling 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 by others as precedent.

A copy of this letter is being sent to your authorized representative pursuant to a
power of attorney on file in this office.

If you have any questions concerning this ruling, please contact XXXXXXXXXXX, at
XXXXXXXXXXXXXXX. All correspondence should be addressed to SE:T:EP:RA:T3.

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted copy of letter ruling
Notice 437

cc:
XXXXXXXXXXX