Surviving spouse received a waiver for an inherited IRA rollover

Plain-English summary

After a spouse died, an inherited IRA was distributed through a revocable trust into a non-IRA account. The surviving spouse missed the 60-day rollover deadline after receiving bad advice from the financial institution's adviser while grieving and arranging the funeral. The IRS found the documentation consistent with those explanations and waived the deadline, assuming the spouse had authority under the trust and state law to complete the rollover. The spouse received 60 days from the ruling date to contribute the retained shares and cash to an IRA in the spouse's own name. The waiver did not cover amounts required to be distributed under section 408(a)(6).

Ruling snapshot

• Question: Would the IRS waive the 60-day deadline for rolling an inherited IRA distribution from a revocable trust into the surviving spouse's IRA?
• Outcome: Approved, subject to the spouse's authority and the other rollover requirements.
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

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

JUL 27 2016

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

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SE:T:EP:RA:T1

Legend
Decedent A

Taxpayer B

IRA C

Non-IRA Account D

Financial Institution E
Financial Advisor F
Company G

Individual H

Trust I

State M

Shares and Cash

Dear:

This is in response to your request dated March 28, 2016, as supplemented by
correspondence dated June 29, 2016, in which you request, through your
authorized representative, 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 B withdrew cash and shares of stock from IRA C (“Shares and Cash”).
Taxpayer B asserts that the failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3) of the Code was due to bad advice from Financial
Advisor F and grief following the death of his spouse, Decedent A.

Decedent A maintained an IRA, IRA C, with Financial Institution E. Decedent A
named her spouse, Taxpayer B, as the 100 percent primary beneficiary of her IRA.
In 2013, Decedent A was diagnosed with serious illnesses. After her diagnosis,
Taxpayer B and Decedent A met with Individual H, a senior consultant with
Company G, a firm specializing in estate planning. Individual H helped Decedent A
and Taxpayer B to establish a revocable trust, Trust I, under the laws of State M,
and advised Decedent A to list Trust I as the 100 percent beneficiary of IRA C,
which she did.

Decedent A and Taxpayer B were Co-Trustees and Co-Trustors of Trust I. Trust I
provides that on the death of a Co-Trustor, the surviving spouse shall have the
power to amend or revoke Trust I. Taxpayer B represents that according to the
terms of Trust I and the laws of State M, Taxpayer A has full ownership and control
over the assets in Trust I.

On January 15, 2015, Decedent A passed away. After the death of Decedent A,
Taxpayer B met with Financial Advisor F, a consultant with Financial Institution E,
the custodian for IRA C. On February 3, 2016, Financial Advisor F had Taxpayer B
sign an IRA Beneficiary distribution form, which Financial Advisor F had prepared.
Financial Advisor F also established a non-IRA account, Non-IRA Account D, which
was held within Trust I, to receive the distributions from IRA C. On February 6,
2015, the Shares and Cash were distributed from IRA C and were deposited into
Non-IRA Account D. A few days later, Financial Advisor F informed Taxpayer B
that the IRA distribution was taxable. Although Taxpayer B expressed concern,
Financial Advisor F and Financial Institution E failed to inform Taxpayer B that
Financial Institution E allowed a rollover through a trust to the IRA of a surviving
spouse.

During this time, Taxpayer B was distraught over the loss of his wife of 39 years,
and he was also preoccupied with making funeral arrangements for her. On
September 3, 2015, Taxpayer B learned that he could have rolled over the IRA

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distribution made to Trust I into an IRA; however, the 60-day period had expired.
Taxpayer B represents that the Shares and Cash have not been used for any other
purpose, although some of the Shares were sold by Financial Institution E and the
proceeds were credited to Non-IRA Account D.

Based on the above facts and representations, you request that the IRS waive the
60-day rollover requirement with respect to the distribution from IRA C on February
6, 2015.

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.

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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, all of the facts and circumstances such as death and
financial institution error are considered when deciding whether to grant a waiver of
the 60-day rollover requirement. The information presented and documentation
submitted by Taxpayer B are consistent with his assertion that the failure to
accomplish a timely rollover of the distribution from IRA C was due to bad advice
from Financial Advisor F of Financial Institution E and grief following the death of
his spouse, Decedent A.

Assuming that Taxpayer B is authorized under Trust I and the laws of State M to
complete a rollover of the distribution of Shares and Cash, 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 the Shares and Cash from IRA C on February 6,
2015. Only the specific Shares that were distributed from IRA C on such date and
retained by Taxpayer B may be contributed to an IRA. Taxpayer B is granted a
period of 60 days from the issuance of this letter ruling to contribute the Shares and
Cash into an IRA established in his name. 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.

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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 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
at . Please address all correspondence to SE:T:EP:RA:T1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

Cc: