Mental impairment excused late rollover of bullion coins

Plain-English summary

An IRA owner and her spouse both experienced serious mental conditions that impaired their financial decision-making. Acting under a power of attorney, the spouse withdrew bullion coins from the owner's IRA and placed them in a safe-deposit box, where they remained. Their daughter was later appointed guardian and conservator and requested relief so the same coins could be rolled into an IRA for the spouse. The IRS found the medical evidence consistent with the explanation and waived the 60-day deadline under section 408(d)(3)(I). It allowed 60 days to contribute the same property, assuming the coins were not collectibles and all other rollover requirements were met.

Ruling snapshot

• Question: Should the parties' mental impairments excuse the missed deadline to roll bullion coins from an IRA into an IRA for the spouse?
• Outcome: Approved
• Key authorities: IRC §§ 408(d)(3), 408(m); 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

MAY 19 2015

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend

Taxpayer A =
Decedent B =
Individual C =

IRA D =

Financial Institution E =
State F =

Amount 1 =

Dear

This is in response to your request dated January 3, 2014, as supplemented by
correspondence dated May 1, 2014, May 5, 2014, April 27, 2015, and April 28,
2015, 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 Individual C received a distribution equal to Amount 1
from Decedent B’s IRA D. Taxpayer A asserts that a rollover was not made

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within the 60-day rollover period prescribed by section 408(d)(3)(A) of the Code
because Decedent B’s and Individual C’s mental conditions impaired their ability
to make financial decisions during the 60-day period.

Taxpayer A is the daughter of Decedent B and Decedent B’s spouse, Individual
C. Decedent B was the owner of IRA D, which was maintained by Financial
Institution E. Individual C was the designated beneficiary of IRA D. In 2000,
Decedent B was diagnosed with a rare medical condition causing progressive
mental decline. By late 2011, Decedent B was no longer able to manage her
financial affairs and on August 29, 2012, she was moved to a memory care unit.

In the late 1980’s, Individual C had been diagnosed with a serious psychiatric
disorder and was prescribed medication, which had stabilized Individual C’s
behavior. In 2011, Individual C developed toxicity to the medication and was put
on a reduced dosage. Subsequently, he was taken off of the medication and in
July of 2012, Individual C’s physician began trying other medications. Due to
intolerable side effects of the new medications, Individual C was not able to
reach a therapeutic dose, which resulted in a prolonged neurological episode
during the second half of 2012. During this time, Individual C exhibited erratic
behavior, financial irresponsibility, and paranoia. Medical documentation was
submitted in support of Taxpayer A’s assertions.

Acting pursuant to a power of attorney, Individual C began depleting Decedent
B’s IRA D in a series of transactions. The first of these occurred on October 3,
2012, when Individual C withdrew bullion coins equal to Amount 1 from IRA D.
Prior to this withdrawal, Decedent B had taken only the required minimum
distribution. Individual C placed the bullion coins equal to Amount 1 in a deposit
box for safe keeping, where they remain.

On June 24, 2013, a district court in State F appointed Taxpayer A to be the
Guardian and Conservator of Individual C, who had become a danger to himself
and others. On June 24, 2013, the court in State F also appointed Taxpayer A to
serve as the Guardian and Conservator of Decedent A. On October 24, 2013,
the court ordered that Taxpayer A’s appointments become permanent. On
November 6, 2013, Decedent B died.

Based on the above facts and representations, you request a ruling that the
Service waive the 60-day rollover requirement with respect to the distribution of
Amount 1 on October 3, 2012, and that Taxpayer A be given a period of 60 days
from the date of this ruling to roll over the distribution of the same bullion coins
equal to Amount 1 into an IRA established on behalf of Individual C.

Section 408(a) of the Code defines an individual retirement account (“IRA”) to
mean a trust created or organized in the United States, and requires that the
trustee be a bank or an approved non-bank trustee.

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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)).

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).

Effective January 1, 2015, all of an individual’s IRAs are aggregated for purposes
of applying the one rollover per year limit set forth in section 408(d)(3)(B) of the
Code.

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.

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Rev. Proc. 2003-16, 2003-4 I.R.B. 359, provides that the Service will issue a
ruling waiving the 60-day rollover requirement in cases 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 taxpayer.
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 presented and documentation submitted by Taxpayer A are
consistent with her assertion that the failure to complete a rollover of the
distribution of Amount 1 from IRA D was due to Decedent B’s and Individual C’s
mental conditions which impaired their ability to make financial decisions during
the 60-day rollover period.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the
60-day rollover period with respect to the distribution of Amount 1. Provided all
other requirements of section 408(d)(3) (except the 60-day requirement) are met,
the contribution of the same property received in the distribution, equal to
Amount 1, to an IRA established on behalf of Individual C within 60 days from the
date of the this ruling will be considered a rollover contribution within the meaning
of section 408(d)(3).

This ruling assumes that the bullion coins to be rolled over do not constitute
collectibles as defined under section 408(m) 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 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.

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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: