Family crisis justified IRA rollover waiver

Plain-English summary

A 77-year-old IRA owner intended to transfer a maturing annuity into another IRA. While caring for his terminally ill wife, he received a confusing surrender form and directed the proceeds to a non-IRA trust account. His wife died shortly before the distribution, and he mistakenly believed his longtime financial institution had completed the rollover. The money remained unused. The IRS concluded that the missed deadline resulted from the combined effects of caregiving, grief, confusing forms, and reliance on the financial institution. It waived the 60-day deadline and gave him 60 days from the ruling's issuance to contribute the distribution to an IRA.

Ruling snapshot

• Question: Could the IRA owner receive a rollover waiver after family hardship and confusing forms led to a deposit in a non-IRA account?
• Outcome: Approved, with 60 days to complete the rollover
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

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

201524031

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

MAR 18 2015

SE:T:EP:RA:T1

Uniform Issue List: 408.03-00

Legend

Taxpayer A =
IRA B =
IRA C =
Account D =
Trust E =
Financial Institution F =
Financial Institution G =
Financial Institution H =
Amount 1 =

2 201524031

Dear :

This is in response to your request dated November 20, 2014, as supplemented
by correspondence dated February 18, 2015, in which you request, through your
authorized representative, 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 he received a distribution equal to Amount 1 from
IRA B, an annuity contract described under section 408(b) of the Code, which
was maintained by Financial Institution F. Taxpayer A asserts that his failure to
accomplish a rollover of Amount 1 within the 60-day period prescribed by
408(d)(3)(A) was due to a combination of factors, including caring for his
terminally-ill wife, grieving her loss after her death, being provided with confusing
distribution forms, and relying on Financial Institution G to effectuate the rollover.
Taxpayer A was 77 years old on the date of the distribution.

On June 17, 2002, Taxpayer A purchased an IRA annuity contract, IRA B. The
initial guarantee period for IRA B was 10 years. In 2012, Taxpayer A received
correspondence from Financial Institution F informing Taxpayer A that IRA B was
scheduled to mature on June 17, 2012. As with previous IRAs, Taxpayer A
planned to roll over the cash surrender value of IRA B by direct transfer into IRA
C, an individual retirement account under section 408(a) of the Code, which was
maintained by Financial Institution G. Financial Institution G had been Taxpayer
A's investment advisor for over 30 years. Taxpayer A maintained his retirement
account, IRA C, and a non-IRA account, Account D, with Financial Institution G.
Account D is a non-IRA account held within Trust E, a revocable living trust
established by Taxpayer A and his spouse. Taxpayer A and his spouse were the
Grantors and Co-Trustees of Trust E.

In correspondence dated April 14, 2012, Financial Institution F informed
Taxpayer A that if he did not act by June 17, 2012, IRA B would automatically
renew at a substantially lower rate. In early May, while Taxpayer A was waiting
for further instructions from Financial Institution F regarding how to effectuate a
rollover of the proceeds from IRA B to IRA C, Taxpayer A's spouse of 55 years
was diagnosed with a terminal illness. After her diagnosis, Taxpayer A began
caring for his wife at home prior to her move to hospice care.

During the latter part of May, Taxpayer A received the surrender request form
sent by Financial Institution F. Taxpayer A was confused by the form, which did
not specifically provide a rollover option. Taxpayer A, distraught over his wife's
condition and preoccupied with her care, completed the form by identifying
Account D, a non-IRA account, as the account into which the proceeds from IRA
B should be deposited. Taxpayer A mailed the surrender request form back to

3 201524031

Financial Institution F on May 25, 2012. On June 12, 2012, Taxpayer A's spouse
died.

On June 20, 2012, Financial Institution F wired Amount 1 to non-IRA Account D.
You represent that under state law and the terms of Trust E, Taxpayer A, is the
Surviving Grantor and sole Trustee, and has full ownership and control over the
assets in non-IRA Account D.

On August 14, 2012, a date within the 60-day rollover period, Taxpayer A
completed a Beneficiary Distribution Form received from Financial Institution G
regarding the disposition of his deceased wife's IRA maintained by Financial
Institution G. Taxpayer A indicated on the form that the assets in her IRA should
be rolled over to IRA C. At this time, Taxpayer A did not follow up with Financial
Institution G to confirm that the distribution of Amount 1 from IRA B had been
rolled over into IRA C because Taxpayer A assumed that Financial Institution G
had properly handled his financial affairs and that Amount 1 had been rolled over
into IRA C. Taxpayer A represents that Amount 1 has not been used for any
other purpose.

Based on the above facts and representations, Taxpayer A requests that the
Service waive the 60-day rollover requirement with respect to the distribution of
Amount 1 from IRA B and that Taxpayer A be given a period of 60 days from the
issuance of a private letter ruling to roll over Amount 1 into an IRA.

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.

Section 408(d)(3) of the Code provides the rules applicable to IRA rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) 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 or 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)).

4 201524031

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 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 of the Treasury may
waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D)
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).

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) of the Code, 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 and documentation submitted by Taxpayer A are consistent with
his assertion that the failure to accomplish a rollover of Amount 1 within the 60-
day period prescribed by 408(d)(3)(A) of the Code was due to a combination of
factors, including caring for his terminally-ill wife, grieving her loss after her
death, being provided with confusing distribution forms, and relying on Financial
Institution G to effectuate the rollover.

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 ruling letter to contribute Amount 1 into an IRA account. Provided all other
requirements of section 408(d)(3), except the 60-day requirement, are met with
respect to such contributions, Amount 1 will be considered a rollover contribution
within the meaning of section 408(d)(3).

5 201524031

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 who requested it. Section 6110(k)(3)
of the Code provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling
is being sent to your authorized representative.

If you wish to inquire about this ruling, please contact
at . Please address all correspondence to SE:T:EP:RA:T1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

cc: