Trauma supports waiver of IRA rollover deadline

Plain-English summary

An IRA owner withdrew funds from a maturing certificate of deposit to seek a higher return and deposited the money in a non-IRA account. She did not complete a rollover within 60 days because she was suffering from post-traumatic stress disorder after a violent criminal attack and was unable to function normally. The funds were not used for another purpose and were later contributed to a different IRA. The IRS waived the 60-day deadline, subject to the taxpayer satisfying all other rollover requirements.

Ruling snapshot

• Question: Could the taxpayer receive a waiver of the 60-day IRA rollover deadline because trauma impaired her ability to act?
• Outcome: Approved, the later IRA contribution could qualify as a rollover.
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

Number: 201639023
Release Date: 9/23/2016

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUN 29 2016

Uniform Issue List: 408.03-00

Legend
Taxpayer A = [redacted]

IRA B = [redacted]
Non-IRA Account C = [redacted]
IRA D = [redacted]

Financial Institution E = [redacted]
Financial Institution F = [redacted]

Amount 1 = [redacted]

Dear [redacted]:

This is in response to your request dated November 23, 2015, 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 she received a distribution equal to Amount 1 from IRA
B, which was maintained by Financial Institution E. Taxpayer A represents that
the 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 post-traumatic stress disorder
following a violent criminal attack.

Taxpayer A maintained IRA B with Financial Institution E. Amount 1 was invested
in a CD that was maturing. In order to get a higher rate of return, Taxpayer A
received a distribution from IRA B on December 3, 2013, equal to Amount 1, which
was deposited into Non-IRA Account C, which was also maintained by Financial
Institution E. Taxpayer A submitted documentation showing that throughout the
rollover period, Taxpayer A was suffering from post-traumatic stress disorder
following a violent criminal attack. As a result of her mental condition, Taxpayer A
has been unable to function normally. Taxpayer A represents that Amount 1 has
not been used for any other purpose. On April 4, 2014, a date after the expiration
of the 60-day rollover period, Taxpayer A contributed Amount 1 to IRA D, which
was maintained by Financial Institution F.

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 B.

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.

The information and documentation submitted are consistent with Taxpayer A’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 due to Taxpayer A’s post-
traumatic stress disorder following a violent criminal attack.

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 from
IRA B. Provided all other requirements of section 408(d)(3), except the 60-day
requirement, were met with respect to the contribution of Amount 1 to IRA D on
April 4, 2014, such 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.

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

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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