Impaired financial judgment excuses late IRA rollover

Plain-English summary

An IRA owner withdrew funds to buy collectible gold pieces advertised on television and did not complete a rollover within 60 days. His daughter, who held power of attorney for his financial affairs, was unaware of the transactions and had not approved them. When she discovered the purchase, she contacted the gold company and obtained a refund. A physician documented that the taxpayer's medical condition left him unable to make sound financial decisions. The IRS waived the 60-day deadline and gave him 60 days from the ruling date to contribute the refunded amount to a rollover IRA.

Ruling snapshot

• Question: Could the taxpayer receive a waiver after impaired financial judgment led him to withdraw IRA funds and buy collectible gold?
• Outcome: approved
• 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

AUG 8 2016

201645022

Uniform Issue List: 408.03-00

Legend:

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T:EP:RA:T2

Taxpayer A: = ***
IRA X = ***
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Amount D = ***

Bank M = ***

Bank N = ***

Individual B = ***

Dear ***:

This is in response to your letter, dated August 10, 2015, as supplemented by
correspondence dated December 18, 2015, and February 9, 2016, in which your
authorized representative, on your behalf, requested 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 received a distribution from IRA X of Amount D. 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 his medical conditions which affects his ability to make sound
financial decisions.

Taxpayer A maintained IRA X with Bank M. During February 2014, Taxpayer withdrew
funds from IRA X to purchase collectible gold pieces as advertised on television leaving

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Amount D as the remaining balance in IRA X. On April 7, 2014, Taxpayer A withdrew
Amount D from IRA X to buy additional gold pieces, essentially closing out the account.
Due to Taxpayer A’s medical conditions, he did not have any idea of the tax
ramifications of withdrawal of the funds from IRA X to purchase the gold pieces.

Taxpayer A’s daughter, Individual B, who has power of attorney to manage and handle
Taxpayer A's financial affairs, was unaware of the transactions and did not assist in the
investment in gold or approve of the distribution of funds from IRA X. When individual B
discovered the investment in gold, she immediately contacted the gold company and
the funds were refunded.

Documentation from Taxpayer A’s physician shows that Taxpayer A is unable to make
sound financial decisions.

Based on the facts and representations, Taxpayer A requests that the Internal Revenue
Service (“Service”) waive the 60 day rollover requirement 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.

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 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).


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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.

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 on behalf of Taxpayer A is
consistent with the assertion that his failure to accomplish a timely rollover was due to
his mental condition which affects his ability to make sound financial decisions.

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 D from IRA X.
Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount D 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 of Amount D 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 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.

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If you wish to inquire about this ruling, please contact * ** at * * *. Please address all
correspondence to SE:T:EP:RA:T2.

Sincerely yours,

Sherri M. Edelman, Manager,
Employee Plans Technical Group 2

Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose

cc:
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