Medical conditions justified waiver of IRA rollover deadline

Plain-English summary

An elderly taxpayer took a distribution from his IRA intending to roll it over within 60 days. He had recently undergone hip replacement surgery, his spouse had chronic orthopedic problems, and their medical conditions caused him to miss the deadline by nine days. After paying federal and state taxes on the distribution, he asked to roll the remaining amount back into an IRA. The IRS found the documentation consistent with his explanation, waived the deadline under section 408(d)(3)(I), and gave him 60 days from the ruling’s issuance to contribute the remaining amount.

Ruling snapshot

• Request: Waive the 60-day deadline for an IRA rollover
• Outcome: Approved; 60 days from the ruling’s issuance to contribute the remaining amount to an IRA
• Key authorities: I.R.C. § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

COMMISSIONER
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 31 2015
201543021

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend

Taxpayer A =

Taxpayer B =

IRA C =

Financial Institution D =

Amount 1 =

Amount 2 =

Dear
:

This is in response to your request dated February 8, 2015, as supplemented by correspondence dated July 4, 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 on October 14, 2014, he received a distribution equal to Amount 1 from IRA C, an individual retirement account (“IRA”) described in section 408(a) of the Code, which was maintained by Financial Institution D.
Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3)(A) was due to the medical conditions of Taxpayer A and Taxpayer A’s spouse, Taxpayer B.

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201543021

In August of 2014, Taxpayer A had hip replacement surgery. Taxpayer A’s physician informed him that for several weeks after the surgery, he would be using a walker or crutches and would need assistance performing everyday tasks. On September 8, 2014, Taxpayer A’s physician recommended that Taxpayer A continue using a walker and taking medication for pain and inflammation. In addition, Taxpayer B, Taxpayer A’s spouse, suffered from chronic orthopedic issues that compromised her ability to walk. Taxpayer A and Taxpayer B are both elderly individuals.

On October 14, 2014, Taxpayer A requested a distribution equal to Amount 1 from IRA C with the intention to complete a rollover within the 60-day period. Due to circumstances beyond their control and their ongoing medical issues, Taxpayer A missed the 60-day period by nine days. In April of 2015, Taxpayer A paid federal income and state taxes on the distribution of Amount 1 from IRA C, which left Amount 2 remaining from total distribution Amount 1.

Based on the above facts and representations, Taxpayer A requests a waiver of the 60-day rollover requirement with respect to the distribution of Amount 1 from IRA C to enable him to roll over Amount 2, an amount equal to Amount 1 less taxes paid on the distribution, back into 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 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)).

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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.

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 Taxpayer A’s assertion that the failure to complete a timely rollover of the distribution of Amount 1 from IRA C was due to Taxpayer A’s and Taxpayer B’s medical conditions.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the 60- day rollover requirement with respect to the distribution of Amount 1 from IRA C and Taxpayer A has 60 days from the issuance of this letter ruling to contribute Amount 2 into an IRA. Provided all other requirements of section 408(d)(3), except the 60-day requirement, will be met with respect to the contribution of Amount 2 to an IRA, the contribution of this amount is considered a rollover contribution within the meaning of section 408(d)(3).

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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.

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