IRS waives the 60-day IRA rollover deadline after the account owner's death

Plain-English summary

An estate's executrix asked the IRS to waive the 60-day deadline for rolling an IRA distribution into another IRA. The account owner had severe cognitive impairment from a terminal illness and died during the rollover period, while the distributed funds remained in a non-IRA bank account. The IRS concluded that the impairment and death supported relief under IRC § 408(d)(3)(I). It gave the executrix 60 days from the ruling date to contribute up to the distributed amount to one or more IRAs in the decedent's name, assuming state law authorized her to act and all other rollover requirements were met.

Ruling snapshot

• Question: May the estate receive a waiver of the 60-day IRA rollover deadline after the account owner's severe cognitive impairment and death?
• Outcome: Approved
• Key authorities: IRC §§ 408(a), 408(d)(3), and 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND MAY 25 2016

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00 SE:T:EP:RA:T1

Legend

Decedent A =

Executrix B =

IRA C =
Non-IRA Account D =

Financial Institution E =
Financial Institution F =
Individual G =
Individual H =
State M =

Amount 1 =

201634026

Dear

This is in response to your request dated January 22, 2016, from 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 ("the Code").

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

Executrix B represents that Decedent A received a distribution equal to Amount 1
from IRA C. Executor B asserts that Decedent A's failure to accomplish a rollover
within the 60-day period prescribed by section 408(d)(3) of the Code was due to
Decedent A's severe cognitive impairment and subsequent death during the 60-day
period.

Decedent A owned several IRAs which were maintained by Financial Institution E.
On August 20, 2015, Decedent A’s IRAs were consolidated through trustee-to-
trustee transfers to a single IRA, IRA C, with Financial Institution E. Decedent A’s
three children, Executrix B, Individual G, and Individual H, were the designated
beneficiaries of IRA C. On August 26, 2015, Decedent A received a lump sum
distribution of Amount 1 from IRA C. On September 4, 2015, Amount 1 was placed
in Decedent A’s non-IRA bank account, Non-IRA Account D, maintained by
Financial Institution F.

In July of 2015, Decedent A had been diagnosed with a serious terminal illness that
caused severe cognitive impairment. On August 7, 2015, Decedent A was
hospitalized, and on August 13, 2015, he began receiving treatments for his illness.
Over the next few weeks, Decedent A’s physical condition worsened and on
September 5, 2015, Decedent A died. Documentation submitted by Decedent A’s
physician states that Decedent A’s “decision making was severely impaired by
extensive brain disease ....”

Executrix B represents that Amount 1 has not been used for any other purpose.

Based on the above facts and representations, you request a waiver of the 60-
rollover requirement under 408(d)(3) of the Code to allow Executrix B to roll over
Amount 1 into an IRA in the name of Decedent A.

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
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.

Under Rev. Proc. 2003-16, death is one of the circumstances that the Service will
consider when deciding whether to grant a waiver of the 60-day rollover
requirement. The information presented and documentation submitted by Executrix
B are consistent with her assertion that the failure to accomplish a timely rollover of
the distribution from IRA C was caused by Decedent A’s severe cognitive
impairment and death during the 60-day period.

Assuming that Executrix B is authorized under the laws of State M to complete a
rollover of the distribution of Amount 1, pursuant to section 408(d)(3)(I) of the Code,
the Service hereby waives the 60-day rollover requirement with respect to the
distribution of Amount 1 from IRA C. Executrix B is granted a period of 60 days
from the issuance of this letter ruling to contribute an amount not more than Amount
1 into one or more IRAs in the name of Decedent A. Provided all other
requirements of section 408(d)(3), except the 60-day requirement, are met with
respect to such contribution, the contribution will be 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.

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.

A copy of this letter has been sent to your authorized representative in accordance
with a power of attorney on file with this office.

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: