Documented mental impairment justified a late IRA rollover

Plain-English summary

An individual received an IRA certificate-of-deposit distribution after the account matured. She was disabled, had limited English comprehension, had relied on her late husband to handle financial matters, and submitted a physician's statement supporting her mental impairment. Unsure what to do with the distribution check, she left it uncashed in a drawer until a family member found it after the 60-day rollover period. The IRS waived the deadline and gave her 60 days from the ruling letter to contribute up to the distributed amount to a rollover IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: Could the 60-day IRA rollover deadline be waived because a documented mental condition impaired the taxpayer's ability to handle the distribution?
• Outcome: approved, with 60 days from the ruling letter to complete the contribution
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

AUG 01 2016

201644022

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend:
Taxpayer A =

IRA X =

Amount B =

Bank C =

Dear

This is in response to your letter dated December 7, 2015, as supplemented
by correspondence dated, June 9, 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 she received a distribution from IRA X totaling
Amount B. Taxpayer A asserts that her failure to complete a rollover of Amount
B, within the 60-day period prescribed by section 408(d)(3) of the Code, was
due to a mental condition which impaired her ability to make adequate financial
and personal decisions.

Taxpayer A’s deceased husband, who passed away on June 14, 2014,
helped her establish IRA X in 2006. Prior to his death Taxpayer A’s
husband handled their financial affairs. Taxpayer A is disabled and unable
to conduct financial transactions. Taxpayer A has very limited English

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language speaking and comprehension ability, and requires help from
family members for transportation, legal, financial, and health matters.

On June 17, 2015, the Individual Retirement Account Certificate of
Deposit, IRA X, with Bank C matured.

On June 27, 2016, Taxpayer A went to Bank C and told a representative
of Bank C that she wished to renew the certificate of deposit but wanted to
get a higher rate of return. The representative explained that the renewal
rates were low and suggested that she should consult with other banks for
better returns. IRA X was closed on June 27, 2015, and a check in Amount
B, was issued to Taxpayer A. Taxpayer A, not knowing what to do with the
check, put it in a kitchen drawer until a family member discovered the
uncashed check in early September 2015, after the sixty day rollover
period expired.

Taxpayer A submitted information from her physician attesting to her
mental impairment.

Based on the facts and representations, you request a ruling that the
Internal Revenue Service (the "Service") waive the 60-day rollover
requirement contained in section 408(d)(3) of the Code with respect to the
distribution of Amount B.

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 of the Code.

Section 408(d)(3) of the Code defines, and provides the rules applicable to IRA
rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) of the
Code 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 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 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

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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 may waive the 60-
day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) of the Code
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 (January 27, 2003) provides that 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 presented and documentation submitted by Taxpayer A is
consistent with her assertion that her failure to accomplish a timely rollover
was due to a mental condition which impaired her ability to make adequate
financial and personal decisions.

Therefore, 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 B from IRA X. Taxpayer A is granted a period of 60 days from the
issuance of this ruling letter to contribute an amount not to exceed Amount B
into a rollover IRA. Provided all other requirements of section 408(d)(3) of the
Code, except the 60-day requirement, are met with respect to such

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contribution, the contribution will be considered a rollover contribution within
the meaning of section 408(d)(3) of the Code.

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
Please address all
correspondence to SE:T:EP:RA:T1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1