Couple receives IRA rollover waivers after surgery-related memory loss

Plain-English summary

An 86-year-old husband withdrew funds from his IRA and his wife's IRA and placed both distributions in their joint checking account while considering new investments. He had suffered memory loss and cognitive problems after coronary bypass surgery and forgot about the funds, while his wife believed he had completed her rollover. Their son discovered the mistake, and both spouses later deposited the unused amounts into new IRAs. The IRS found that the husband's medical condition and the wife's reliance on him explained the missed deadlines. It waived the 60-day rollover requirement for both distributions, subject to the other rollover rules.

Ruling snapshot

• Question: Should both spouses receive waivers after surgery-related memory loss and reliance on the affected spouse caused missed IRA rollover deadlines?
• Outcome: Approved for both completed rollovers
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

Legend
Taxpayer A =

Taxpayer B =

IRA C =

IRA D =

IRA E =

IRA F =

Financial Institution G =
Financial Institution H =
Company I =
Amount 1 =

Amount 2 =

DEPARTMENT OF THE TREASURY                                      201627007

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

APR 06 2016

SE:T:EP:RA:T1

2 201627007

Dear

This is in response to your request dated November 18, 2015, as supplemented
by correspondence dated March 7, 2016, in which you request 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 A represents that he received a distribution equal to Amount 1 from IRA
C, which was maintained by Financial Institution G. Taxpayer A asserts that his
failure to accomplish a rollover within the 60-day period prescribed by section
408(d)(3)(A) of the Code was due to loss of memory and cognitive function
following major surgery.

Taxpayer B, Taxpayer A’s spouse, represents that she received a distribution
equal to Amount 2 from IRA D, which was maintained by Financial Institution G.
Taxpayer B asserts that her failure to accomplish a rollover within the 60-day
period was because she believed Taxpayer A had rolled over her IRA distribution.

In June, 2013, Taxpayer A, age 86, had coronary bypass surgery. In October,
2013, Taxpayer A and Taxpayer B met with their financial advisor with Company I
to discuss their investments. The investment advisor indicated that since the level
of their assets had fallen below a minimum level, Company I could no longer
manage their assets and they should look at annuities and other similar
investments for their assets. On December 16, 2013, Taxpayer A withdrew
Amount 1 from IRA C and Amount 2 from IRA D with Financial Institution G.
Taxpayer A deposited Amounts 1 and 2 into Taxpayer A’s and Taxpayer B's joint
checking account, intending to hold the distributions there for four to six weeks
while he explored other investment options. However, Taxpayer A has suffered
ongoing memory loss and cognitive issues as a result of the major surgery in June
of 2013. Consequently, Taxpayer A forgot about the distributions. In June of
2014, the son of Taxpayer A and Taxpayer B discovered the error when, on
reviewing the Taxpayers’ finances, he noticed Amount 1 and Amount 2 in the
Taxpayers’ checking account and learned they were IRA distributions. The
Taxpayers’ son advised Taxpayer A to complete the rollovers to IRAs with
Financial Institution H, and guided the Taxpayers in completing the rollovers. On
July 24, 2014, Taxpayer A rolled over Amount 1 into IRA E with Financial
Institution H. On August 7, 2014, Taxpayer B rolled over Amount 2 into IRA F,
which was also maintained by Financial Institution H.

Taxpayer A and Taxpayer B represent that Amount 1 and Amount 2 have not been
used for any other purpose. Taxpayer A and Taxpayer B have submitted
documentation in support of the above representations.


3 201627007

Based on the above facts and representations, Taxpayer A requests a waiver of
the 60-day rollover requirement with respect to the distribution of Amount 1 from
IRA C.

Based on the above facts and representations, Taxpayer B requests a waiver of
the 60-day rollover requirement with respect to the distribution of Amount 2 from
IRA D.

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.


4 201627007

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.

The information and documentation submitted are consistent with Taxpayer A’s
assertion that the failure to accomplish a rollover within the 60-day period
prescribed by 408(d)(3)(A) of the Code was due to loss of memory and cognitive
function after major surgery.

The information and documentation submitted are consistent with Taxpayer B’s
assertion that the failure to accomplish a rollover within the 60-day period was
because she believed Taxpayer A had rolled over her IRA distribution.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the 60-
day rollover requirement with respect to the distribution equal to Amount 1 and
Amount 2. Provided all other requirements of section 408(d)(3) of the Code,
except the 60-day requirement, were met with respect to the contribution of
Amount 1 to IRA E and Amount 2 to IRA F, such contributions are 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.

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.


5 201627007

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.

If you wish to inquire about this ruling, please contact
          at          . Please address all correspondence to SE:T:EP:RA:T1.

Sincerely yours,

[signature]
Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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