IRS waives two IRA rollover deadlines for elderly couple

Plain-English summary

An elderly husband withdrew funds from his IRA and his wife's IRA and deposited them into non-IRA accounts. The husband had been diagnosed with Alzheimer's disease, and the wife relied on him to handle her finances while she was preoccupied with his illness. Their daughter was later appointed as his conservator and discovered the failed rollovers after the couple received an IRS notice of deficiency. The IRS waived the 60-day rollover deadline for both distributions and gave each spouse 60 days to contribute the respective amount to an IRA in that spouse's name.

Ruling snapshot

• Question: Should each spouse receive a waiver of the 60-day IRA rollover deadline because illness and reliance on the other spouse caused the missed deadlines?
• Outcome: Approved, with 60 days to complete both rollovers
• Key authorities: IRC §§ 72 and 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201629014

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

APR 20 2016

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend
Taxpayer A =

Taxpayer B =
IRA C =
IRA D =
Non-IRA Account E =
Non-IRA Account F =

Financial Institution G =
Financial Institution H =
Financial Institution I =
Financial Institution J =
Conservator K =

State M =

2 201629014

Amount 1 =
Amount 2 =
Dear                 :

This is in response to your request dated January 18, 2016, in which you request,
through your authorized representative, 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.

Conservator K represents that Taxpayer A received a distribution equal to Amount
1 from IRA C, which was maintained by Financial Institution G. Conservator K
represents that Taxpayer A’s failure to accomplish a rollover within the 60-day
period prescribed by section 408(d)(3)(A) of the Code was due to Taxpayer A’s
deteriorating mental condition.

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 H.
Taxpayer B asserts that her failure to accomplish a rollover within the 60-day
period was because Taxpayer B relied on Taxpayer A to handle her financial
affairs and was also preoccupied with Taxpayer A’s illness.

On March 19, 2013, Taxpayer A withdrew Amount 1 from IRA C. On March 28,
2013, Taxpayer A deposited Amount 1 into a non-IRA savings account, Non-IRA
Account F, which was maintained by Financial Institution J. The documentation
submitted shows that Amount 1 has not been used for any other purpose.

On July 29, 2013, Taxpayer A withdrew Amount 2 from Taxpayer B’s IRA D and
on August 8, 2013, he deposited Amount 2 into a non-IRA checking account, Non-
IRA Account E, which was maintained by Financial Institution I. The
documentation submitted shows that Amount 2 has not been used for any other
purpose.

Taxpayer A and Taxpayer B are elderly. In February of 2012, Taxpayer A was
diagnosed with Alzheimer’s. On August 21, 2014, Taxpayer A’s and Taxpayer B’s
daughter, Conservator K, was appointed by State M to manage Taxpayer A’s
financial affairs. Conservator K discovered the failed rollovers when Taxpayer A
and Taxpayer B received a Notice of Deficiency from the Service for the

year.

3 201629014

Based on the above facts and representations, you request a waiver of the 60-day
rollover requirement with respect to the distributions of Amount 1 from IRA C and
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.

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

4 201629014

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 Conservator K’s
assertion that Taxpayer A’s failure to accomplish a rollover within the 60-day
period prescribed by section 408(d)(3)(A) of the Code was due to his deteriorating
mental condition.

The information and documentation submitted are consistent with Taxpayer B’s
assertion that her failure to accomplish a rollover within the 60-day period
prescribed by section 408(d)(3)(A) of the Code was because she relied on
Taxpayer A to handle her financial affairs.

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, will be met with respect to the contributions of
Amount 1 and Amount 2 to IRAs, such contributions will be considered rollover
contributions within the meaning of section 408(d)(3). Taxpayer A and Taxpayer B
have 60 days from the issuance of this letter ruling to complete the rollovers of
Amount 1 and Amount 2 into their own IRAs.

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.

5 201629014

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is
being sent to your authorized representative.

If you wish to inquire about this ruling, please contact
at                        . Please address all correspondence to              .

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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

Cc: