Health issues justify late IRA rollover

Plain-English summary

A taxpayer withdrew funds from an IRA intending to roll them into another IRA. During a demanding period after a divorce and business purchase, she experienced sleep difficulty, anxiety, exhaustion, and memory lapses. She deposited the funds in her SEP-IRA about seven days after the 60-day deadline and supplied documentation from her treating physician. The IRS found that the evidence supported her account and waived the 60-day rollover requirement under section 408(d)(3)(I).

Ruling snapshot

• Question: Would health issues justify waiving the 60-day deadline for an IRA-to-SEP-IRA rollover completed about seven days late?
• Outcome: Approved, provided the rollover satisfied all requirements other than the 60-day deadline.
• Key authorities: IRC §§ 72 and 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

DEC 21 2015


Uniform Issue List: 408.03-00

Legend

Taxpayer A =
IRA B =
SEP-IRA C =

Financial Institution D =

Amount 1 =

Dear                 :

This is in response to your request dated July 19, 2015, as supplemented by
correspondence received October 28, 2015, and November 18, 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 March 5, 2015, she received a distribution equal to
Amount 1 from IRA B, an individual retirement account (“IRA”) described in section
408(a) of the Code, which was maintained by Financial Institution D. Taxpayer A
asserts that her failure to accomplish a rollover within the 60-day period prescribed
by section 408(d)(3)(A) was due to health issues.



On March 5, 2015, Taxpayer A requested a distribution equal to Amount 1 from
IRA B with the intention to complete a rollover. After going through a bitter
divorce, Taxpayer A had purchased a business with respect to which spring was
the busiest season. Due to high turnover of employees, Taxpayer A was working
seven days a week and was exhausted by all of her efforts. Taxpayer A had
difficulty sleeping, suffered from anxiety, and experienced memory lapses.
Consequently, Taxpayer A did not deposit Amount 1 into her other IRA, SEP-IRA
C, until May 12, 2015, approximately seven days after the expiration of the 60-day
rollover period. SEP-IRA C is also maintained by Financial Institution D.

Taxpayer A submitted documentation from the physician who treated Taxpayer A’s
health issues.

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 B.

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)).

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 she failed to complete a timely rollover
of the distribution of Amount 1 from IRA B due to health issues.

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 B.

Provided all other requirements of section 408(d)(3), except the 60-day
requirement, were met with respect to the contribution of Amount 1 to SEP-IRA C,
the contribution of this amount is 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.

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