Serious illness excused late rollovers from two IRAs

Plain-English summary

An individual withdrew amounts from two IRAs while suffering from a serious medical condition that impaired her ability to manage her finances. Her condition continued through the 60-day rollover periods and later required hospitalization, after which it improved and stabilized. She kept the combined amount in a non-IRA savings account, and her submission included documentation of the illness. The IRS found the evidence consistent with her explanation and waived the rollover deadline under section 408(d)(3)(I). It gave her 60 days from the ruling date to contribute the combined amount to an IRA, provided all other rollover requirements were met.

Ruling snapshot

• Question: Should serious illness and hospitalization excuse the missed 60-day deadlines for two IRA rollovers?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3); 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 22 2015

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend
Taxpayer A =

IRA B =
IRA C =
Account D =

Financial Institution E =
Financial Institution F =
Amount 1 =
Amount 2 =
Amount 3 =

Dear

This is in response to your request dated January 22, 2015, as supplemented by
correspondence dated April 6, 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”).

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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 and Amount 2 from IRA C, which IRAs were maintained by Financial
Institution E. Taxpayer A asserts that her failure to accomplish rollovers within
the 60-day period prescribed by section 408(d)(3)(A) of the Code was due to
Taxpayer A’s medical condition.

Taxpayer A suffered from a serious medical condition beginning in 2011 that
lasted until October 2013. On or about January 24, 2013, Taxpayer A withdrew
Amount 1 from IRA B and Amount 2 from IRA C. Amount 1 and Amount 2 total
Amount 3. At the time of the withdrawals, Taxpayer A continued to suffer from
the medical condition which affected her ability to manage her financial affairs. In
August of 2013 through October 15, 2013, Taxpayer A was hospitalized for her
medical condition and, as a result, her condition improved and became stable.
Amount 3 has been retained in Account D, a non-IRA savings account
maintained by Financial Institution F. The submission includes documentations
of Taxpayer A’s illness.

Based on the above facts and representations, Taxpayer A requests a waiver of
the 60-day rollover requirement contained in section 408(d)(3) of the Code with
respect to the distributions of Amount 1 from IRA B and Amount 2 from IRA C.

Section 408(a) of the Code defines an 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.

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

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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.

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
distributions of Amount 1 from IRA B and Amount 2 from IRA C was due to
Taxpayer A’s medical condition during the 60-day rollover period.

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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 from IRA B and
Amount 2 from IRA C in January of 2013. Taxpayer A is granted a period of 60
days from the issuance of this letter ruling to contribute Amount 3, the total of
Amounts 1 and 2, to an IRA. Provided all other requirements of section
408(d)(3), except the 60-day requirement, are met with respect to such
contribution, the contribution of Amount 3 into an IRA will be considered a
rollover contribution within the meaning of section 408(d)(3).

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: