Death during rollover period supports IRA deadline waiver

Plain-English summary

An IRA owner withdrew funds intending to move them to another IRA and temporarily placed the distribution in a non-IRA account. Twelve days later he suffered a massive stroke, and he died before the 60-day rollover period expired. His executor later discovered the incomplete rollover and represented that the money had not been used for another purpose. Assuming state law authorized the executor to act, the IRS waived the deadline and granted 60 days to contribute no more than the distributed amount to one or more IRAs in the decedent's name.

Ruling snapshot

• Question: Could an executor complete an IRA rollover after the owner became suddenly ill and died during the 60-day period?
• Outcome: Approved, conditional on the executor's state-law authority and completion within 60 days of the ruling.
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

Number: 201639021
Release Date: 9/23/2016

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUN 29 2016

Uniform Issue List: 408.03-00

Legend

Decedent A = [redacted]
Executor B = [redacted]
IRA C = [redacted]
Non-IRA Account D = [redacted]
Non-IRA Account E = [redacted]
Company F = [redacted]
Bank G = [redacted]
Bank H = [redacted]
Company I = [redacted]
Individual J = [redacted]
Individual K = [redacted]
State M = [redacted]
Amount 1 = [redacted]

Dear [redacted]:

This is in response to your request dated December 1, 2015, as supplemented by
correspondence dated April 18, 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:

Executor B represents that Decedent A received a distribution equal to Amount 1
from IRA C. Executor B asserts that Decedent A's failure to accomplish a rollover
within the 60-day period prescribed by section 408(d)(3) of the Code, was due to
Decedent A's sudden illness and subsequent death within the 60-day period.

Decedent A owned IRA C which was maintained by Company F. Prior to June 25,
2014, the date on which the investments in IRA C were scheduled to mature,
Decedent A, Decedent A’s son, Individual J, Executor B, and Decedent A’s financial
advisor, Individual K, met to discuss rolling over the assets in IRA C into an IRA with
Company I. On July 8, 2014, Decedent A received the distribution from IRA C, equal
to Amount 1, and deposited Amount 1 into non-IRA Account D with Bank G. On July
20, 2014, Decedent A suffered a massive stroke and on July 31, 2014, Decedent A
died before completing the rollover. In early 2015, Executor B discovered that the
rollover had not been completed within the 60-day rollover period. Executor B
represents that Amount 1 has not been used for any other purpose and is being held
in non-IRA Account E with Bank H. Executor B submitted documentation showing
that Decedent A intended to complete a rollover of Amount 1 but due to his death
within the 60-day rollover period, he was unable to complete a timely rollover.

Based on the facts and representations, you request a ruling that the 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(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.

Under Rev. Proc. 2003-16, death is one of the circumstances that the Service will
consider when deciding whether to grant a waiver of the 60-day rollover requirement.
The information presented and documentation submitted by Executor B are
consistent with his assertion that the failure to accomplish a timely rollover of the
distribution from IRA C was caused by Decedent A’s sudden illness and subsequent
death during the 60-day period.

Assuming that Executor B is authorized under the laws of State M to complete a
rollover of the distribution of Amount 1, 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. Executor B is granted a period of 60 days from
the issuance of this letter ruling to contribute an amount not more than Amount 1 into
one or more IRAs in the name of Decedent A. Provided all other requirements of
section 408(d)(3), 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).

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.

A copy of this letter has been sent to your authorized representative in accordance
with a power of attorney on file with this office.

If you wish to inquire about this ruling, please contact [redacted].
Please address all correspondence to SE:T:EP:RA:T1.

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

Cc: