Double bereavement supports late survivor rollover waiver

Plain-English summary

A surviving spouse was the sole beneficiary of her husband's profit-sharing plan account. Her husband died from a heart attack while traveling to her mother's funeral, leaving her to handle both estates while grieving both deaths. Overwhelmed, she took a lump-sum distribution instead of electing a direct rollover and deposited the net proceeds into a non-IRA savings account. The funds remained unused and the account held enough to replace the withheld taxes. The IRS waived the 60-day deadline so the full distribution could be contributed to her own IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Could a surviving spouse receive a waiver after grief and estate responsibilities caused her to miss the rollover deadline?
• Outcome: Approved
• Key authorities: IRC § 402(c)(3)(B); 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

JUN 18 2015

201537030

Uniform Issue List: 402.00-00

Legend

SE:T:EP:RA:TJ

Taxpayer A =

Individual B =
Plan C =

Account D =

Financial Institution E =

Amount 1 =
Amount 2 =
Dear

This is in response to your request dated March 19, 2015, as supplemented by
correspondence dated May 20, 2015, in which you request a waiver of the 60-day
rollover requirement contained in section 402(c)(3)(A) 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 from Plan C totaling
Amount 1. Taxpayer A asserts that her failure to accomplish a rollover within the
60-day period described in section 402(c)(3) of the Code was due to grief and
stress following the deaths of her mother and her spouse.

Taxpayer A’s spouse, Individual B, participated in Plan C, a profit sharing plan that
was maintained by his employer. Taxpayer A was the sole beneficiary of
Individual B’s account benefit under Plan C.

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Taxpayer A represents that on October 4, 2014, her spouse, Individual B, died
from a heart attack on his way to Taxpayer A’s mother’s funeral. At the time of her
husband's death, Taxpayer A was also dealing with the loss of her mother and
handling her mother’s estate. Overwhelmed by grief and the stress of handling
her husband’s as well as her mother’s estates, Taxpayer A failed to elect a direct
rollover of Individual B’s benefit under Plan C, equal to Amount 1, with respect to
which she was the sole beneficiary. Rather, on December 15, 2014, Taxpayer A
took a lump sum distribution from Plan C and deposited Amount 1, less Amount 2,
the amount withheld for federal income taxes, into Account D. Account D was
Taxpayer A’s non-IRA savings account maintained by Financial Institution E. On
March 5, 2015, Taxpayer A realized her mistake when she met with her
accountant. On March 9, 2015, Taxpayer A requested a waiver of the 60-day
rollover period from the IRS.

The information and documentation submitted by Taxpayer A show that Amount 1
has not been used for any other purpose and that Account D held sufficient funds
to roll over Amount 1 into an IRA.

Based on the above facts and representations, you request that the IRS waive the
60-day rollover requirement with respect to the distribution of Amount 1 from Plan
C.

With respect to your ruling requests, section 401(a) of the Code provides the
qualification rules applicable to retirement plans set up by employers exclusively to
benefit their employees and their beneficiaries.

Section 402(a)(1) of the Code provides that except as otherwise provided in this
section, any amount actually distributed to any distributee by any employees' trust
described in section 401(a) which is exempt from tax under section 501(a) shall be
taxable to the distributee, in the taxable year of the distributee in which distributed,
in the manner provided under section 72 (relating to annuities).

Section 402(c) of the Code provides rules governing rollovers of amounts from
exempt trusts to eligible retirement plans, including IRAs.

Section 402(c)(1) of the Code provides, generally, that if any portion of an eligible
rollover distribution from a qualified employees trust is paid to the employee in an
eligible rollover distribution and the employee transfers any portion of the property
received in such distribution to an eligible retirement plan, and in the case of a
distribution of property other than money, the amount so transferred consists of
the property distributed, such distribution (to the extent so transferred) shall not be
includible in gross income for the taxable year in which paid.

Section 402(c)(2) of the Code provides that the maximum amount of an eligible
rollover distribution to which paragraph (1) applies shall not exceed the portion of

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such distribution which is includible in gross income (determined without regard to
paragraph (1)).

Section 402(c)(3)(A) of the Code provides, generally, that section 402(c)(1) shall
not apply to any transfer of a distribution made after the 60th day following the day
on which the distributee received the property distributed.

Section 402(c)(3)(B) of the Code provides that the Secretary may waive the 60-
day requirement under subparagraph (A) 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 occur after December 31, 2001, are
eligible for the waiver under section 402(c)(3)(B).

Section 402(c)(4) of the Code defines “eligible rollover distribution" as any
distribution to an employee of all or a portion of the balance to the credit of an
employee in a qualified trust, except that such term shall not include:

(A) any distribution which is one of a series of substantially equal periodic
payments (not less frequently than annually) made --

(i) for the life (or life expectancy) of the employee or the joint lives (or joint
life expectancies) of the employee and the employee's designated beneficiary, or

(ii) for a specified period of 10 years or more,

(B) any distribution to the extent the distribution is required under section
401(a)(9), and

(C) any distribution which is made upon hardship of the employee.

Section 402(c)(6)(A) of the Code provides that the transfer of an amount equal to
any portion of the proceeds from the sale of property received in the distribution
shall be treated as the transfer of property received in the distribution.

Section 402(c)(6)(B) of the Code provides that the excess of the fair market value
of property on sale over its fair market value on distribution shall be treated as
property received in the distribution.

Section 402(c)(6)(D) of the Code provides that no gain or loss shall be recognized
on any sale described in subparagraph (A) to the extent that an amount equal to
the proceeds is transferred pursuant to paragraph (1).

Section 402(c)(8) of the Code defines eligible retirement plan as (i) an individual
retirement account described in section 408(a); (ii) an individual retirement annuity
described in section 408(b) (other than endowment contract); (iii) a qualified trust;
(iv) an annuity plan described in section 403(a); (v) an eligible deferred
compensation plan described in section 457(b) maintained by an eligible employer
as described in section 457(e)(1)(A); and (vi) an annuity contract described in
section 403(b).

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Revenue Procedure 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
402(c)(3)(B) 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 support her
assertion that her failure to accomplish a rollover within the 60-day period
described in section 402(c)(3) of the Code was due to stress and grief following
the deaths of her mother and her spouse.

Therefore, pursuant to section 402(c)(3)(B) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distribution of Amount

1. Provided all other requirements of section 402(c)(3), except the 60-day
   requirement, will be met with respect to the contribution of Amount 1 to her own
   IRA, Amount 1 will be considered a rollover contribution within the meaning of
   section 402(c)(3).

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.

If you wish to inquire about this ruling, please contact
. Please address all correspondence to

Sincerely yours,
Carlton A. Watkins

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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