Bad advice and cancer treatment justify rollover waivers

Plain-English summary

Two taxpayers missed the 60-day IRA rollover deadline. One relied on a financial adviser who incorrectly said the rollover period was 90 days and redeposited the distribution after 81 days. The other was undergoing extensive treatment following cancer surgery, which interfered with managing financial affairs, and redeposited the requested amount after 93 days. The IRS found the documentation consistent with both explanations and waived the 60-day requirement for the specified amounts. The redeposits would qualify as rollovers if all other section 408(d)(3) requirements were met.

Ruling snapshot

• Question: Should the IRS waive the 60-day rollover deadline for erroneous professional advice and a serious medical condition?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201544033
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 05 2015

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:

Taxpayer A =

Taxpayer B =

IRA C =

Financial Institution D =

IRA E =

Financial Institution F =

Individual G =

Amount 1 =

Amount 2 =

Amount 3 =

Amount 4 =

Dear :

This letter is in response to a letter dated September 24, 2014, as supplemented by
correspondence, dated February 9, 10, April 30 and May 8, 2015, in which you request

a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal
Revenue Code (“Code”).

The following facts and representations have been submitted under penalties of perjury
in support of your request.

201544033

Taxpayer A represents that she received a distribution from IRA C totaling Amount 1.
Taxpayer B represents that he received a distribution from IRA E totaling Amount 2.
Taxpayer A and Taxpayer B assert that their failure to accomplish a rollover within the
60-day period prescribed by section 408(d)(3) of the Code was due to their reliance on
the inaccurate information provided by Individual G, a financial advisor with Financial
Institution D concerning the rollover period, as well as Taxpayer B’s medical condition.

Taxpayer A maintained IRA C with Financial Institution D. Taxpayer B maintained
IRA E with Financial Institution F. On December 16, 2013, Taxpayer A withdrew
Amount 1 from IRA C. On December 8, 2013, Taxpayer B withdrew Amount 2 from
IRA E. The funds were intended to be used on a short-term basis for living expenses.
Taxpayer A states that she withdrew Amount 1 from IRA C based on Individual G’s
recommendation. In addition, Individual G advised Taxpayer A that she had 90 days
to complete a rollover. Taxpayer B used a portion (Amount 3) of the withdrawal to pay
for medical expenses not covered by insurance.

Taxpayer B was diagnosed with cancer in 2012 and had to have surgery on February
25, 2013. He continued to face extensive post-operative treatment for this illness
throughout the rollover period for Amount 2. Taxpayer B represents that his medical
condition interfered with the management of his financial affairs. The ruling request is
accompanied by medical documentation which supports Taxpayer B’s representations.

Taxpayer A and B intended to roll these amounts back into IRAs within the 90-day
period. On March 7, 2014, Taxpayer A redeposited Amount 1 into IRA C, 81 days after
it was distributed. Because of Taxpayer B’s medical condition, on March 11, 2014,
Taxpayer B redeposited Amount 4 into IRA E 93 days after it was distributed.

Based upon the foregoing facts and representations, you request that the Service waive
the 60-day rollover requirement with respect to the distributions of Amount 1 from IRA C

and Amount 4 from IRA E.

Section 408(d)(1) of the Code provides that, except as otherwise provided in section
408(d) of the Code, 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 of the Code.

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

201544033

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

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

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), 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

201544033

or postal error; (3) the use of 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 is consistent
with her assertion that her failure to accomplish a timely rollover of Amount 1 was
caused by her reliance on the erroneous advice concerning the 60-day rollover period
she received from Individual G. In addition, the information presented and
documentation submitted by Taxpayer B is consistent with his assertion that his failure
to accomplish a timely rollover of Amount 4 was caused by complications from an
ongoing medical condition which interfered with the management of his financial affairs.

Therefore, pursuant to section 408(d)(3) of the Code, the Service hereby waives the 60-
day rollover requirement with respect to the distribution of Amount 1 from IRA C and
Amount 4 from IRA E. Provided all other requirements of section 408(d)(3) of the Code,
except the 60-day requirement, were met with respect to Taxpayer A’s contribution of
Amount 1 into IRA C on March 7, 2014, and Taxpayer B’s contribution of Amount 4 into
IRA E on March 11, 2014, such contributions will be considered rollover contributions
within the meaning of section 408(d)(3) of the Code.

No opinion is expressed as to the tax treatment of the transactions described herein
under the provisions of any other section of either the Code or regulations, which may
be applicable thereto.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited by others as precedent.

If you wish to inquire about this ruling, please contact (I.D. # ), ,

at( )

Sincerely yours,
[illegible]

Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of Ruling Letter
Notice of Intention to Disclose