Taxpayer with dementia received an IRA rollover deadline waiver

Plain-English summary

A taxpayer withdrew all funds from an IRA after misunderstanding a letter from the financial institution and deposited the distribution in a non-IRA account. The taxpayer missed the 60-day rollover deadline because dementia impaired her ability to manage her finances, and her daughter did not learn of the withdrawal until receiving Form 1099-R. Two physicians supported the taxpayer's condition, and the distributed amount had not been used for another purpose. The IRS waived the deadline under section 408(d)(3)(I) and allowed 60 days from the ruling date to transfer up to the distributed amount into a rollover IRA. The waiver did not cover any required minimum distribution.

Ruling snapshot

• Question: Would the IRS waive the 60-day deadline for rolling an IRA distribution into another IRA?
• Outcome: Approved. The taxpayer received 60 days from the ruling date to complete the rollover, subject to the other rollover requirements.
• Key authorities: IRC §§ 72, 401(a)(9), and 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

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

MAR 03 2015

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

201522010

SE:T:EP:RA:T1

Legend:
Taxpayer A =
IRA B =

Financial Institution C =
Financial Institution D =
Amount 1 =

Amount 2 =

Dear:

This is in response to your request for a private letter ruling dated October 15, 2013, as supplemented by correspondence dated March 18, 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 equal to Amount 1 from IRA B, which was maintained by Financial Institution C. Taxpayer A asserts

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that her failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to Taxpayer A's mental condition which impaired her ability to manage her financial affairs. Taxpayer A further represents that Amount 1 has not been used for any other purpose.

Taxpayer A maintained IRA B with Financial Institution C. Taxpayer A had regular distributions of Amount 2 per month for January through November of 2012. In late 2012, Taxpayer A represents she received a letter from Financial Institution C which led her to believe that if she didn’t withdraw all of her funds immediately from her IRA, she would have to wait a long period of time before she had access to the money. On November 28, 2012, Taxpayer A completed a total distribution of IRA B in Amount 1. Taxpayer A deposited Amount 1 in a non- IRA account with Bank D. The request is accompanied by letters from 2 physicians that Taxpayer A has been treated for dementia and she lacks the ability to make informed decisions. Taxpayer A’s daughter has a power-of- attorney over her financial affairs but was unaware of the withdrawal until she received the Form 1099-R.

Based on the facts and representations, you request a ruling that the Internal Revenue Service waive the 60 day rollover requirement contained in section 408(d)(3) of the Code with respect to the distribution of Amount 1.

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 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

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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.

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 A is consistent with her assertion that her failure to accomplish a timely rollover was due to Taxpayer A’s mental condition which impaired her ability manage her financial affairs.

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 1 from IRA B. Taxpayer A is granted a period of 60 days from the issuance of this letter ruling to transfer an amount not to exceed Amount 1 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.

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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 ruling has been sent to your authorized representative pursuant to a power of attorney on file in this office. If you wish to inquire about this ruling, please contact [redacted] (ID # [redacted]) at ([redacted]). Please address all correspondence to [redacted].

Sincerely yours,

Carlton A. Watkins

Manager
Employee Plans Technical Group 1

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose

cc: