Husband’s death justified IRA rollover waiver

Plain-English summary

A surviving spouse requested relief after her husband withdrew funds from his IRA while hospitalized and died before completing a rollover. She represented that she did not know about the withdrawal until her tax preparer later identified it and that the money had not been used for another purpose. The IRS found those facts consistent with a failure caused by the husband’s death and the spouse’s lack of knowledge. It waived the 60-day deadline under section 408(d)(3)(I), allowing the amount to be contributed to a rollover IRA if all other rollover requirements were met.

Ruling snapshot

• Question: Could the surviving spouse receive a waiver of the 60-day IRA rollover deadline after her husband’s hospitalization and death?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

201524029

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAR 19 2015

SE:T:EP:RA:T:3

U.I.L. 408.03-00
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXX
Individual M = XXXXXXXXXXXX
IRA X = XXXXXXXXXXXX
Amount D = XXXXXXXXXXX
Date 1 = XXXXXXXXXXX
Date 2 = XXXXXXXXXXX

Dear xxxxxxxxx:

This is in response to your letter dated October 1, 2014, as supplemented by
correspondence dated January 15, 2015, submitted by you, 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 her husband, Individual M, 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) was due to
death of her husband, Individual M, and her lack of knowledge that Amount D
was withdrawn from IRA X by Individual M.

201524029

Taxpayer A represents that on Date 1, her husband, Individual M, withdrew
Amount D from IRA X with intent to rollover Amount D within the 60-day rollover
period. Taxpayer A further represents that prior to and within the 60-day period,
Individual M, her husband, was hospitalized with numerous complications
following his back surgery. The withdrawal transactions from IRA X were made
by Individual M while he was in the hospital. On Date 2, Individual M passed
away.

Taxpayer A asserts that she was not aware of the distribution of Amount D from
IRA X until February, 2014, when her tax prepare told her of the withdrawal
transactions from IRA X. Amount D has not been used for any other purpose.

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)

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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 her assertion that her failure to accomplish a timely rollover was
due to the death of her husband, Individual M and her lack of knowledge that
Amount D was withdrawn from IRA X by her husband, Individual M.

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 to a rollover IRA 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.

201524029

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.

If you have any questions regarding this letter, please contact xxxxxxxxxxxxxxx,
at xxxxxxxxx. All correspondence should be addressed to SE:T:EP:RA:T:2.

Sincerely yours,

Sherri M. Edelman, Manager
Employee Plans Technical Group 2
Enclosures:

Deleted copy of letter ruling
Notice of Intention to Disclose