IRA rollover deadline waived while taxpayer cared for an ill stepson

Plain-English summary

A taxpayer withdrew money from an IRA certificate of deposit intending to move it to another IRA with a higher return. During the entire 60-day rollover period, the taxpayer was occupied around the clock caring for a stepson whose worsening mental-health condition required extensive attention. The taxpayer missed the deadline, discovered the error one week later, and represented that the money had not been used for another purpose. The IRS found that the medical circumstances impaired the taxpayer’s ability to manage financial affairs and were beyond the taxpayer’s reasonable control. It waived the deadline and granted 60 days from the ruling date to place up to the distributed amount into a rollover IRA.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover deadline because caring for an ill stepson prevented timely action?
• Outcome: Approved.
• Key authorities: IRC §§ 72, 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
201621021
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 25 2016

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:
Taxpayer =
IRA B =

Bank C =

Account D =

Financial Institution E =

Amount 1 =

Dear
:

This is in response to a request for a private letter ruling dated November 27, 2015, from your authorized representative, 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 penalty of perjury in support of the ruling requested:

Taxpayer A represents that he received a distribution of Amount 1 from IRA B. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) of the Code was due to the care for his step-son’s deteriorating medical condition which impaired Taxpayer A’s ability to manage his financial affairs. Taxpayer A further represents that Amount 1 has not been used for any other purpose.

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Taxpayer A maintained IRA B, an individual retirement account (IRA) under section 408(a) of the Code, with Bank C. IRA B was invested in a Certificate of Deposit that was set to mature on May 19, 2015. On May 20, 2015, seeking a higher rate of return, Taxpayer A took a distribution of Amount 1 from IRA B. The funds were deposited into his checking account (Account D) with Financial Institution E. Taxpayer A intended to roll this amount into another IRA. Prior to and during the entire 60-day rollover period, Taxpayer was pre-occupied with his step-son’s mental health issues. The step-son, who resides with Taxpayer A and his spouse, refused to seek proper treatment which resulted in numerous mental health situations. The ruling request is accompanied by a psychological evaluation of his step-son that provides a detailed description of his condition and symptoms. In dealing with his step-son’s mental illness on a “24-7” basis, Taxpayer A failed to complete the intended rollover during the 60-day rollover period which ended on July 19, 2015. On July 26, 2015, Taxpayer realized he missed his rollover deadline.

Based on the above facts and representations, you request that the Internal Revenue Service (“Service”) waive the 60-day rollover requirement contained in section 408(d)(3) of the Code with respect to Amount 1.

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 provides the rules applicable to IRA rollovers.

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)).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) of the Code does not apply to any amount described in section 408(d)(3)(A)(i) of the Code 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) of the Code from an IRA which was not

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includible in gross income because of the application of section 408(d)(3) of the Code.

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.

Revenue Procedure 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.

The information presented and the documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish a timely rollover of Amount 1 was due to his care for his step-son and his step-son’s worsening medical condition which impaired Taxpayer A’s ability to manage his financial affairs and complete the rollover during the 60-day rollover period.

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 B. Taxpayer A is granted a period of 60 days from the issuance of this letter ruling to transfer an amount not to exceed Amount 1 into a rollover IRA. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contribution, the contribution will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

This ruling does not authorize the rollover of amounts that are required to be distributed by section 408(a)(6) of the Code.

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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.

A copy of this letter ruling has been sent to your authorized representative pursuant to a power of attorney on file in this office. If you wish to inquire about this ruling, please contact (I.D. # ), , at ( ) or.

Sincerely yours,

[signature]

Manager
Employee Plans Technical Group 1

Enclosures:
Deleted Copy of this Letter
Notice of Intention to Disclose, Notice 437

cc: