Caregiver duties justify late IRA rollover waiver

Plain-English summary

A taxpayer withdrew funds from an IRA intending to return them within 60 days, but his spouse’s serious medical problems required hospitalization, surgeries, and more than six weeks of around-the-clock care during the rollover period. He contacted the financial institution one day after the deadline and promptly sent a cashier’s check as instructed. The IRS found that the spouse’s condition and the taxpayer’s caregiving duties impaired his ability to complete the rollover on time and waived the 60-day requirement. The redeposit qualified as a rollover if all other section 408(d)(3) requirements were met.

Ruling snapshot

• Question: Should the 60-day IRA rollover deadline be waived because the taxpayer was serving as full-time caregiver for a seriously ill spouse?
• Outcome: Approved; the redeposit is treated as a rollover subject to all other applicable requirements.
• Key authorities: IRC §§ 408(d)(3)(I) and 6110(k)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

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

201514021

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 05 2015

SE:T:EP:RA:T:3

U.I.L. 408.03-00

XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXX

Individual B = XXXXXXXXXXX

IRA X = XXXXXXXXXXX

Amount D = XXXXXXXXXXX

Company C = XXXXXXXXXXX

Date 1 = XXXXXXXXXXX

Date 2 = XXXXXXXXXXX

Date 3 = XXXXXXXXXXX

Dear XXXXXXXXXX:

This is in response to your letter dated July 16, 2014, as supplemented by
correspondence dated September 22, 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.

2 201514021

On Date 1, Taxpayer A 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 the medical condition of
Individual B, spouse of Taxpayer A, and his duties as her caregiver which
impaired his ability to accomplish a timely rollover.

On Date 1, Taxpayer A withdrew Amount D from IRA X with the intent to rollover
the funds back into IRA X within the 60-day rollover period.

Taxpayer A represents that prior to and during the 60-day rollover period,
Individual B, Taxpayer A’s spouse, experienced numerous medical problems,
requiring hospitalization, surgeries, and his full-time service as primary caregiver.
Individual B was confined to bed for many weeks. Taxpayer A took care of her
medical needs, as well as the daily needs of his children and other daily
household tasks, in addition to his business responsibilities. Individual B required
24-hour care for more than 6 weeks since she was bedridden during that time,
which included the 60-day rollover period.

On Date 2, a Monday, which was one day after the 60-day rollover period,
Taxpayer A contacted Company C to redeposit Amount D into IRA X. Company
C advised Taxpayer A to obtain a cashier’s check, and told him that as long as it
was post-marked that day, the repayment would be treated as being timely
received for purposes of the 60-day rollover requirement. Accordingly, as advised
by Company C, Taxpayer A sent the cashier’s check totaling Amount D to
Company C to redeposit Amount D into IRA X. Company C redeposited Amount
D into IRA X on Date 3.

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 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

3 201514021

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).

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 the medical condition of Individual B and his duties as her caregiver which
impaired his ability to accomplish a timely rollover.

4 201514021

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 X on Date 3 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 408(a)(6) 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.

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 XXXXXXXX, at
XXXXXX. All correspondence should be addressed to SE:T:EP:RA:T:3.

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:

Deleted copy of letter ruling
Notice of Intention to Disclose

cc: XXXXXXXXXX