Disability and caregiving support late IRA rollover waiver

Plain-English summary

A taxpayer withdrew money from an IRA to buy a home where she could care for her mother, who had dementia and needed a stable environment. She intended to replace the money after receiving her share of a jointly owned home, but the sale was delayed beyond the 60-day rollover period. Her own autoimmune disease, disability, caregiving duties, and difficult personal circumstances impaired her ability to complete the rollover on time. She later sent the money to the financial institution, which first placed it in a brokerage account and then transferred it to the IRA. The IRS waived the 60-day requirement, provided all other rollover requirements were met and the amount was not a required distribution.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover deadline because disability and caregiving responsibilities impaired her ability to act?
• Outcome: Approved, subject to satisfaction of all other rollover requirements.
• Key authorities: IRC § 408(d)(3)(I); 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

201640026

U.I.L. 408.03-00                              JUL 06 2016

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SE:T:EP:RA:T2

Legend:

Taxpayer A = XXXXXXXXXX
Individual B = XXXXXXXXXX
IRA X = XXXXXXXXXX
Financial Institution C = XXXXXXXXXX
Amount D = XXXXXXXXXX
Trust E = XXXXXXXXXX
Individual M = XXXXXXXXXX
Date 1 = XXXXXXXXXX
Date 2 = XXXXXXXXXX
Date 3 = XXXXXXXXXX
Date 4 = XXXXXXXXXX

Dear xxxxxxxxx:

This is in response to your letter dated October 14, 2015, as supplemented by
correspondence dated March 2, 2016, and June 16, 2016, submitted on your behalf by
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 your request.

2                                                           201640026

On Date 1, Taxpayer A received a distribution from IRA X totaling Amount D. Taxpayer
A asserts that her failure to accomplish a rollover within the 60-day period prescribed by
section 408(d)(3) of the Code was due to her disability and her responsibility as a
caregiver for her mother, Individual B, which impaired her ability to accomplish a timely
rollover within the 60-day rollover period.

Taxpayer A resided with Individual M, in a jointly owned house. Individual B, Taxpayer
A’s mother, unexpectedly came to live with Taxpayer A and Individual M. However,
Individual B required continued care and a stable environment due to her physical and
mental conditions. When Taxpayer A’s mother came to live with Taxpayer A, Individual
M promised Taxpayer A that he would assist Taxpayer A in caring for Taxpayer A’s
mother, but defaulted on all of his promises. Due to Individual M’s hostile behavior, it
became necessary for Taxpayer A to move Individual B to a suitable house where she
could care for her mother.

As trustee of Trust E, Taxpayer A could have borrowed Amount D from Trust E to
purchase another house. However, on Date 1, Taxpayer A withdrew Amount D from
IRA X in order to purchase a home for her and her mother with the intention to rollover
Amount D back into IRA X when she received the funds from Individual M for her share
of their jointly owned house.

Due to the delays by Individual M in selling the jointly owned house, Taxpayer A did not
receive her share of the jointly owned property until Date 2, which was after the 60-day
rollover period. On Date 3, she mailed Amount D to Financial Institution C to rollover
into IRA X. However, Financial Institution C deposited Amount D into Taxpayer A’s
brokerage account and on Date 4 transferred Amount D back into IRA X.

Taxpayer A represents that she is disabled due to an autoimmune disease. As a result
of the stress of caring for her mother, she suffered a major flare up of her symptoms
and was incapacitated for days. Taxpayer A further represents that stressful
circumstances and the deterioration of her relationship with Individual M, and her
mother’s precarious health and mental condition along with her own disability impaired
Taxpayer A’s ability to accomplish a timely rollover.

Documentation from Taxpayer A’s physician and her mother’s physician shows that
Taxpayer A has several medical conditions and is considered disabled, and that her
mother needs continued care and requires a stable environment because of dementia.

Based on the facts and representations, Taxpayer A requests that the Internal Revenue
Service (Service) waive the 60 day rollover requirement with respect to the distribution
of Amount D.

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.

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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 received 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 included 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 and good conscience, including
casualty, disaster, or other events beyond the reasonable control of the individual
subject to such requirement. Only distributions that occur 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, 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, or
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.

4                                                           201640026

The information presented and documentation submitted by Taxpayer A is consistent
with the representation that her disability and her responsibilities as a caregiver for
Individual B impaired her ability to accomplish a timely rollover within the 60-day rollover
period.

Therefore, pursuant to Code section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distribution of Amount D from
IRA X. Provided all other requirements of section 408(d)(3) of the Code, except the 60-
day requirement, were met with respect to such contribution, the contribution of Amount
D into IRA X on Date 4 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.

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 that 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 is being sent to your authorized representative pursuant to a Power
of Attorney on file with this office.

If you have any questions regarding this letter, please contact xxxxxxxxxxx, xxxxxxxxxx.
All correspondence should be addressed to SE:T:EP:RA:T:2.

Sincerely yours,

Sherri M. Edelman, Manager
Employee Plans Technical Group 2

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

cc:

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