Surviving spouse receives waiver for late IRA rollover

Plain-English summary

A surviving spouse's late husband's IRA named his estate as beneficiary, and the estate passed to a trust for which she was sole trustee and beneficiary. She had authority to distribute the IRA assets to herself, but first deposited the distribution into a non-IRA estate account and did not transfer it to her own IRA within 60 days. She attributed the delay to emotional distress after her husband's untimely death and the stress of administering his estate. The IRS concluded that she could have rolled the assets into her own IRA and waived the 60-day deadline under section 408(d)(3)(I). Assuming all other rollover requirements are met, the later contribution to her IRA is treated as a rollover contribution, but the ruling does not cover required minimum distributions.

Ruling snapshot

• Question: May the surviving spouse receive a waiver of the 60-day deadline for rolling the IRA distribution into her own IRA?
• Outcome: Yes, the IRS waived the deadline, subject to all other section 408(d) requirements.
• Key authorities: IRC §§ 72 and 408; Treas. Reg. § 1.408-8; Rev. Proc. 2003-16

Full text (IRS public release)

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

COMMISSIONER                         NOV 09 2015                         201606032

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1
Legend
Taxpayer A =
Decedent B =
IRA C =

Trust D =

Account E =

IRA F =

Financial Institution G =
Financial Institution H =

Amount 1 =

Dear                  :

This is in response to your request dated January 26, 2015, as supplemented by

correspondence dated August 24, 2015, and September 22, 2015, in which you
request, through your authorized representative, a waiver of the 60-day rollover

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requirement contained in section 408(d)(3) of the Internal Revenue Code (the
“Code”).

The following facts and representations have been submitted under penalties of
perjury in support of the ruling requested.

Taxpayer A represents that on February 26, 2013, her deceased husband's
estate received a distribution from IRA C equal to Amount 1. Taxpayer A, the
executor of his estate, asserts that her failure to roll over the distribution from IRA
C to her own IRA within the 60-day period described in section 408(d)(3) was
due to emotional distress following the untimely death of her spouse, Decedent
B, and the stress of serving as executor of estate.

Taxpayer A was married to Decedent B on December 18, 2012, the date of
Decedent B’s death. Prior to his death, Decedent B owned IRA C, an individual
retirement arrangement (“IRA”) described in section 408(a) of the Code. IRA C
was maintained by Financial Institution G, and Decedent B’s estate was the
beneficiary of IRA C.

Taxpayer A and Decedent B were the Trustees of Trust D until Decedent B’s
death, at which time Taxpayer A became the sole Trustee of Trust D. Decedent
B’s Last Will and Testament provided that his estate pass through to the Trustee
of Trust D. You represent that on Decedent B’s death, Taxpayer A, as sole
trustee and beneficiary under Trust D, had full authority under governing law to
distribute the assets of IRA C to herself.

On February 26, 2013, Taxpayer A requested a lump sum distribution from IRA C
equal to Amount 1. On March 12, 2013, a date within the 60-day rollover period,
Taxpayer A deposited Amount 1 into Account E, a non-IRA account held in the
name of Decedent B’s estate and maintained by Financial Institution H. On
September 27, 2013, after the expiration of the 60-day rollover period, Taxpayer
A requested that Amount 1 be transferred into her own IRA, IRA F. IRA F was
also maintained by Financial Institution H. Amount 1 was deposited into IRA F
on September 30, 2013. Taxpayer A represents that Amount 1 has not been
used for any other purpose.

Based on the above facts and representations, Taxpayer A requests that the
Service waive the 60-day rollover requirement with respect to the distribution of
Amount 1 from IRA C.

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.

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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).

Section 408(d)(3)(C)(i) of the Code provides that the rollover rules of section
408(d)(3) do not apply to inherited IRAs.

Section 408(d)(3)(C)(ii) of the Code provides that the term “inherited IRA” means
an IRA obtained by an individual, other than IRA owner's spouse, as a result of
the death of the IRA owner.

Section 1.408-8 of the Income Tax Regulations, Question and Answer 5,
provides that a surviving spouse of an IRA owner may elect to treat the spouse’s
entire interest as a beneficiary of an individual’s IRA as the spouse’s own IRA. In
order to make this election, the spouse must be the sole beneficiary of the IRA
and have an unlimited right to withdraw amounts from the IRA. If a trust is
named as beneficiary of the IRA, this requirement is not satisfied even if the
spouse is the sole beneficiary of the trust.

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)

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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).

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) 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.

Generally, if the proceeds of a decedent’s IRA are payable to a trust or estate (or
both), and are paid to the trustee of the trust, who then pays them to the
decedent's surviving spouse as the beneficiary of the trust, the surviving spouse
is treated as having received the IRA proceeds from the trust and not from the
decedent. Accordingly, such surviving spouse, in general, is not eligible to roll
over the disturbed IRA proceeds into her own IRA.

However, the general rule will not apply where the surviving spouse is the sole
trustee of the decedent's trust and has the sole authority and discretion under
trust language to pay the IRA proceeds to herself. The surviving spouse may
then receive the IRA proceeds and roll over the amounts into an IRA set up and
maintained in her name.

In this case, Decedent B designated his estate as the beneficiary of his IRA, and
Taxpayer A was the executor of his estate, which passed through to Trust D.
Taxpayer A was also the sole Trustee of Trust D and had the power to distribute
the assets of IRA C from Trust D to herself. Thus, Taxpayer A could have taken
a distribution from IRA C and rolled it over into an IRA in her name. However,
Taxpayer A was emotionally distraught following her husband's untimely death
and overwhelmed by the responsibility of handling his estate.

The information and documentation submitted by Taxpayer A are consistent with
her assertion that the failure to accomplish a rollover of Amount 1 from IRA C into
her own IRA within the 60-day period prescribed by 408(d)(3)(A) of the Code was
due to the emotional distress following her husband’s death and the stress of
administering his estate.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distribution of Amount
1 from IRA C. Provided all other requirements of section 408(d)(3), except the


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60-day requirement, are met with respect to such contribution, the contribution of
Amount 1 to IRA F 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: