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: