Estate gets late rollover waiver after decedent's hospitalization

Plain-English summary

An IRA certificate of deposit matured and the owner received the proceeds into a joint checking account, intending to complete a rollover. His wife went to the bank within the 60-day period, but the bank required him to appear in person to sign the rollover paperwork. He had recently returned from hospitalization and rehabilitation, was rehospitalized on the day they planned to return to the bank, and then died. Acting as executrix, the wife requested relief for the unused distribution. The IRS waived the 60-day deadline and gave her 60 days from the ruling date to contribute up to the distributed amount to a rollover IRA in her own name.

Ruling snapshot

• Question: Could the estate receive a waiver after the IRA owner's hospitalization and death prevented a timely rollover?
• 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

201645023

AUG 8 2016

U.I.L. 408.03-00
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX

SE:T:EP:RA:T2

Legend:
Decedent A = XXXXXXXXXXX
Taxpayer B = XXXXXXXXXXX

IRA X = XXXXXXXXXXX

Bank C = XXXXXXXXXX
Amount D = XXXXXXXXXX
Date 1 = XXXXXXXXXXX
Date 2 = XXXXXXXXXXX
Date 3 = XXXXXXXXXXX
Date 4 = XXXXXXXXXXX

Date 5 = XXXXXXXXXXX

Dear XXXXXXXXXX:

This is in response to your letter dated September 9, 2015, as supplemented by
correspondence dated February 24, 2016, July 7, 2016, and July 27, 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).

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The following facts and representations have been submitted under penalty of perjury in
support of your request.

On Date 1, Decedent A received a distribution from IRA X totaling Amount D. Taxpayer
B, executrix of Decedent A’s estate, asserts that Decedent A’s failure to accomplish a
timely rollover was due to his medical condition and hospitalization during the 60-day
rollover period.

Decedent A had IRA X invested in a Certificate of Deposit (CD) with Bank C. On Date 1,
when the certificate of deposit matured, Decedent A received a distribution of Amount D
from IRA X. Amount D was deposited into his joint checking account with Taxpayer B.
Amount D has not been used for any other purpose.

Decedent A’s wife, Taxpayer B, also had a CD IRA with Bank C and, on Date 1,
received a distribution from her IRA which was deposited into their joint checking
account.

Decedent A had medical conditions, and had been in and out of the hospital and
rehabilitation centers for the past few years. On Date 2, Decedent A was again admitted
to the hospital for two weeks, after which, he was moved to an acute rehabilitation
center for another two weeks and went home on Friday, Date 3. On the same day, on
Date 3, Taxpayer B went to Bank C to rollover the distributions from her IRA and
Amount D from IRA X on behalf of Decedent A. A representative of Bank C told
Taxpayer B that Decedent A had to be present in person to sign the appropriate
paperwork in order to rollover his IRA funds. At this point, Taxpayer B told Bank C that
she would bring Decedent A to Bank C on the following, Monday, Date 4, so they could
both rollover the IRA funds. Unfortunately, on Date 4, still within the 60-day rollover
period, Decedent A went back into the hospital where he passed away on Date 5.

Based on the facts and representations, Taxpayer B, the executrix of Decedent A’s
estate, 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.

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

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201645023
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.

The information presented and documentation submitted by Taxpayer B is consistent
with her assertion that Decedent A’s failure to accomplish a timely rollover was due to
his medical condition and hospitalization during the 60-day rollover period.

Therefore, pursuant to section 408(d)(3)(I), the Service hereby waives the 60-day
rollover requirement with respect to the distribution of Amount D from IRA X. Taxpayer
B is granted a period of 60 days from the issuance of the ruling letter to contribute an
amount not to exceed Amount D into a rollover IRA in the name of Taxpayer B.
Provided all other requirements of section 408(d)(3) of the Code, except the 60-day

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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 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 xxxxxXxxXxxx, # XXXXXXXXX,
at XXXXXXXXXXXXX. 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:
XXXXXXXXXXXX