Surviving spouse may roll over an IRA after other beneficiaries disclaim it

Plain-English summary

A decedent named a trust as the sole beneficiary of an IRA and did not name a contingent beneficiary. Within nine months of death, the trust, the decedent's son, and two grandchildren disclaimed their interests. Under the represented state-law result, the IRA passed through the estate to the surviving spouse as the estate's beneficiary. The IRS ruled that, for the rollover rules, the spouse is treated as having acquired the IRA directly from the decedent rather than from the trust or estate. She may roll the distributed proceeds into one or more IRAs in her own name within 60 days. The timely rolled amount is not included in gross income, but required minimum distributions cannot be rolled over.

Ruling snapshot

• Question: May the surviving spouse roll over the decedent's IRA after the named trust and other family beneficiaries disclaim their interests?
• Outcome: Approved (60-day spousal rollover permitted, excluding required minimum distributions)
• Key authorities: IRC §§ 408(d)(3), 401(a)(9), 2518

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201901005
Release Date: 1/4/2019
Index Number: 408.06-00                                       Person To Contact:
                                                              --------------------------, ID No. ----------------
------------------------                                      -----------------
---------------------------                                   Telephone Number:
-------------------------------------                         --------------------
                                                              Refer Reply To:
In Re: Private Letter Ruling                                  CC:TEGE:EB:QP4
                                                              PLR-113758-18
                                                              Date:
                                                              October 10, 2018



Decedent                  = --------------------------
Taxpayer                  = ------------------------
Son                       = -------------------------
Grandchild A              = ---------------------
Grandchild B              = -------------------------
IRA 1                     = ---------------------------------------------------------------------------------------
                            -------------------------------
Trust                     = ---------------------------------------------------------------------------------------
Trustee                   = -------------------------
State                     = -------------------
Date 1                    = -----------------------
Date 2                    = ----------------
Date 3                    = ------------------
Date 4                    = ------------------


Dear -----------------:

This letter responds to your request dated April 12, 2018, as supplemented by
correspondence dated July 26, 2018, in which several rulings are requested under
section 408(d)(3) of the Internal Revenue Code.

The following facts and representations have been submitted under penalties of perjury
in support of the rulings requested.

Decedent was married to Taxpayer until his death on Date 1, at which time Decedent
was over 70 ½ years old and a resident of State. Decedent was survived by Taxpayer,
and his son, Son, and two grandchildren, Grandchild A and Grandchild B.

At the time of his death, Decedent owned an individual retirement account, IRA 1. The
100% beneficiary of IRA 1 was Trust, and no contingent beneficiary was named.



On Date 2 (within nine months after the death of Decedent), Trustee executed a
“Renunciation and Qualified Disclaimer,” to disclaim any and all interest in IRA 1 to
which Trust may have been entitled. Also on Date 2, Son executed a “Renunciation
and Qualified Disclaimer,” to disclaim any and all interest in IRA 1 to which Son may
have been entitled. On Date 3 (within nine months after the death of Decedent),
Grandchild A executed a “Renunciation and Qualified Disclaimer,” to disclaim any and
all interest in IRA 1 to which Grandchild A may have been entitled. On Date 4 (within
nine months after the death of Decedent), Grandchild B executed a “Renunciation and
Qualified Disclaimer,” to disclaim any and all interest in IRA 1 to which Grandchild B
may have been entitled. Your request states that the above disclaimers (collectively,
the Disclaimers) will qualify as qualified disclaimers under section 2518.

You have represented that, under the applicable laws of State, the Disclaimers result in
IRA 1 passing to Decedent’s estate (because there is no contingent beneficiary of IRA
1) and being governed by Decedent’s will. Additionally, you have represented that,
under the applicable laws of State, the Disclaimers result in Taxpayer being entitled to
IRA 1 as beneficiary of Decedent’s estate.

You have stated that Taxpayer wishes to distribute IRA 1 to herself, as sole beneficiary
of IRA 1 under Decedent’s estate, and roll over such distribution into an individual
retirement account in her own name.

Based on the above, you, through your authorized representative, request the following
letter rulings:

1. Taxpayer, as Decedent’s spouse, will be treated as having acquired IRA 1 directly
from Decedent, and not from Decedent’s estate or Trust.

2. Taxpayer is eligible to roll over IRA 1 to one or more IRAs established and
maintained in her own name pursuant to section 408(d)(3)(A)(i), provided that the
rollover occurs no later than the sixtieth day following the day the proceeds of IRA 1 are
distributed.

3. Taxpayer will not be required to include in her gross income for federal income tax
purposes for the calendar year in which the distribution and rollover occur the amount
distributed from IRA 1 and timely rolled over into the IRAs established and maintained in
Taxpayer’s name.

With respect to your ruling requests, section 408(d)(1) 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) provides that section 408(d)(1) does not apply to a rollover
contribution if such contribution satisfies the requirements of sections 408(d)(3)(A) and
(d)(3)(B).
Section 408(d)(3)(A) 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 account 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 he receives the payment or distribution; or (ii) the entire amount received
(including money and any other property) is paid into an eligible retirement plan 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) 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 one-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 his gross income because of the application of section 408(d)(3).
Section 408(d)(3)(C)(i) provides, in pertinent part, that, in the case of an inherited IRA,
section 408(d)(3) shall not apply to any amount received by an individual from such
account (and no amount transferred from such account to another IRA shall be
excluded from gross income by reason of such transfer), and such inherited account
shall not be treated as an IRA for purposes of determining whether any other amount is
a rollover contribution.
Section 408(d)(3)(C)(ii) provides that an IRA will be treated as inherited if the individual
for whose benefit the account is maintained acquired such account by reason of the
death of another individual, and such individual was not the surviving spouse of such
other individual.
Section 408(d)(3)(E) provides that section 408(d)(3) does not apply any amount to the
extent that such amount is a required minimum distribution described in section
408(a)(6).

In the present case, although Trust was designated as the beneficiary of IRA 1, Trust
disclaimed its interest in IRA 1, and IRA 1 passed to Decedent’s estate. Additionally,
Son, Grandchild A, and Grandchild B disclaimed each of their interests in IRA 1,
resulting in Taxpayer being entitled to IRA 1 as the beneficiary of Decedent’s estate.
Because Taxpayer is entitled to IRA 1 as the beneficiary of Decedent’s estate, then, for
purposes of applying section 408(d)(3)(A) to IRA 1, Taxpayer is effectively the individual
for whose benefit IRA 1 is maintained. Accordingly, if Taxpayer receives a distribution
of the proceeds of IRA 1, she may roll over the distribution (other than those required


minimum distribution amounts required to have been distributed or to be distributed in
accordance with section 401(a)(9)) into an IRA established and maintained in her name.
Therefore, with respect to your ruling requests we conclude that:

1. For purposes of section 408(d)(3), Taxpayer, as Decedent’s spouse, will be treated
as having acquired IRA 1 directly from Decedent, and not from Decedent’s estate or
Trust.

2. Taxpayer is eligible to roll over IRA 1 to one or more IRAs established and
maintained in her own name pursuant to section 408(d)(3)(A)(i), provided that the
rollover occurs no later than the sixtieth day following the day the proceeds of IRA 1 are
distributed.

3. Taxpayer will not be required to include in her gross income for federal income tax
purposes for the calendar year in which the distribution and rollover occur the amount
distributed from IRA 1 and timely rolled over into the IRAs established and maintained in
Taxpayer’s name, provided the rollover contribution meets the requirements of section
408(d)(3).

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. This ruling letter is based on the assumption that all actions by Trustee
discussed or referenced in this letter comply with the laws of State.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalties of perjury statement
executed by an appropriate party, as specified in Rev. Proc. 2018-1, 2018-1 I.R.B. 1,
§ 7.01(16)(b). This office has not verified any of the material submitted in support of the
request for ruling, and such material is subject to verification on examination. The
Associate office will revoke or modify a letter ruling and apply the revocation
retroactively if there has been a misstatement or omission of controlling facts; the facts
at the time of the transaction are materially different from the controlling facts on which
the ruling was based; or, in the case of a transaction involving a continuing action or
series of actions, the controlling facts change during the course of the transaction. See
Rev. Proc. 2018-1, § 11.05.



In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.


                                    Sincerely,



                                    Cathy V. Pastor
                                    Senior Counsel
                                    Qualified Plans, Branch 4
                                    Tax Exempt & Government Entities




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