Concussions and mental stress support rollover waiver

Plain-English summary

An IRA owner with memory and impulse problems following an assault suffered two additional concussions in early 2014. Ten days after the second concussion, he withdrew IRA funds and placed them in a non-IRA account, but later could not explain the withdrawal to his accountant. He was also dealing with medical problems affecting several family members, and his physicians described confusion, emotional stress, impaired recall, and an inability to manage financial affairs. The funds were returned to the IRA after the 60-day deadline. The IRS waived the deadline and treated the redeposit as a rollover if all other requirements were met.

Ruling snapshot

• Question: Should the taxpayer receive a rollover waiver because concussions and family medical stress impaired his ability to manage financial affairs?
• Outcome: Approved
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201625024

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

MAR 21 2016

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:
Taxpayer A =

IRA B =

Financial Institution C =

Account 1 =

Dear                  :

This is in response to your request for a private letter ruling dated October
10, 2015, as supplemented by correspondence dated January 21, and February
29, 2016, 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 (the “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) was due to Taxpayer A's ongoing
medical condition which impaired his ability to manage his financial affairs.
Taxpayer A further represents that Amount 1 has not been used for any other
purpose.

Taxpayer A maintained IRA B with Financial Institution C. Since 2009, as
the result of an assault, Taxpayer A has been suffering from memory and
impulse issues. In addition, in early 2014, Taxpayer A suffered 2 concussions.

201625024

On April 24, 2014, 10 days after his second concussion, Taxpayer A took a
distribution of Amount 1 from IRA B. Taxpayer A deposited Amount 1 in a non-
IRA account. During a meeting with his certified public accountant in July, 2014,
Taxpayer A was unable to articulate the reason he withdrew Amount 1 from IRA
B. On July 15, 2014, Amount 1 was redeposited into IRA B after the expiration of

the 60-day rollover period.

Page 2

Coinciding with the distribution, Taxpayer A was dealing with his and
several members of his family’s medical problems. The ruling request is
accompanied by letters from Taxpayer A’s physicians which describe Taxpayer
A’s state of confusion and emotional and mental stress. They conclude that due
to the combined effect of his three concussions and the strain caused by his
family’s medical issues, Taxpayer A lacks the full ability to properly recall dates,
times and details of events and, therefore, is incapable of making simple
decisions and managing his financial affairs.

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

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 of the Code.

Section 408(d)(3) of the Code defines, and 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) 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


Page 3 201625024

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 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 his assertion that his failure to accomplish a timely rollover of
Amount 1 was due to Taxpayer A's ongoing medical condition which impaired his
ability to manage his financial affairs.

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. Provided all other requirements of section 408(d)(3) of
the Code, except the 60-day requirement, were met with respect to the
contribution of Amount 1 into IRA B on July 15, 2014, such 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 401(a)(9) of the Code.


Page 4 201625024

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,

Carlton A. Watkins

Manager
Employee Plans Technical Group 1

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose

cc: