Hospitalization and death excuse late IRA rollover

Plain-English summary

A taxpayer received a distribution when her IRA certificate of deposit matured and intended to roll the money into another IRA. She relied on her husband for financial decisions, and he was repeatedly hospitalized during the 60-day rollover period. The taxpayer went to the bank within the deadline, but the bank required her husband to appear in person because they also planned to roll over his IRA funds. He was rehospitalized on the day they planned to return and later died, while the taxpayer's distribution remained unused in their joint account. The IRS waived the 60-day deadline and gave the taxpayer 60 days from the ruling date to contribute up to the distributed amount to a rollover IRA.

Ruling snapshot

• Question: Could the taxpayer receive a waiver after her husband's hospitalization and death prevented completion of an intended IRA rollover?
• Outcome: approved
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

201645024

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 8 2016

U.1.L. 408.03-00
SE:T:EP:RA:T2

XXXXXXXXXXXX . | ‘ ;
XXXXXXXXXXXX
XXXXXXXXXXXX
Legend:
TaxpayerA = XXXXXXXXXXX
IndividualB = XXXXXXXXXXX
IRA X = XXXXXXXXXXX
Bank C = XXXXXXXXXXX
AmountD = XXXXXXXXXXX
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 29, 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).

201645024

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

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 the medical condition and hospitalization of
her husband, Individual B, during the 60-day rollover period which impaired her ability to
accomplish a timely rollover.

Taxpayer A had IRA X invested in a Certificate of Deposit (CD) with Bank C. On Date 1,
when the IRA X CD matured, Taxpayer A received a distribution of Amount D with the
intent to rollover Amount D into another IRA account. Taxpayer A’s husband, Individual
B, also had an IRA CD with Bank C and received a distribution of his IRA on Date 1.
Taxpayer A relied upon her husband, Individual B, to make their financial decisions.
Amount D was deposited into Taxpayer A and Individual B's joint checking account and
has not been used for any other purpose.

Individual B had medical conditions and had been in and out of the hospital and
rehabilitation centers for the past few years. On Date 2, Individual B 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, within the 60-day rollover period, Taxpayer A went to Bank C to rollover Amount
D and the distribution from Individual B’s IRA. Taxpayer A was advised by Bank C that
Individual B had to be present in person to sign the appropriate paperwork in order to
rollover his IRA funds. At this point, Taxpayer A told a representative of Bank C that
she would bring Individual B 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, Individual B went back into the hospital where he passed away on Date 5.

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.

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


3 201645024

(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 A is consistent
with her assertion that her failure to accomplish a timely rollover was due to the medical
condition and hospitalization of Individual B during the 60-day rollover period which
impaired her ability to accomplish a timely rollover.

Therefore, pursuant to Code 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
A 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. Provided all other requirements of
section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to


201645024
such contribution, the contribution 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, # XXXXXXXX
XXXXXX, at XXXXXXXXXXXX. 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:
XXXXXXXXXXXXX