IRA rollover waiver granted for one of two distributions

Plain-English summary

An IRA owner withdrew two amounts and deposited them into non-IRA accounts instead of completing rollovers within 60 days. The owner submitted medical documentation showing cognitive impairment, memory loss, and confusion, and represented that the money had not been used for another purpose. The IRS waived the 60-day deadline for the first distribution because the failure was caused by the cognitive impairment. It did not permit the second amount to be rolled into an IRA because the one-rollover-per-year limitation applied. The first amount could qualify as a rollover contribution if all other requirements were met.

Ruling snapshot

• Question: Could both late IRA rollovers receive a waiver of the 60-day deadline?
• Outcome: mixed, waiver granted for the first distribution but the second rollover was barred
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201647014
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 22 2016

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend
Taxpayer A =

IRA B =
Non-IRA Account C =

Financial Institution D =

Financial Institution E =

Amount 1 =

Amount 2 =

Dear

This is in response to your request dated May 14, 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 distributions of Amount 1 and Amount 2
from IRA B, which was maintained by Financial Institution D. Taxpayer A
represents that the failure to accomplish a rollover within the 60-day period

2

201647014

prescribed by section 408(d)(3)(A) of the Code was due to Taxpayer A’s cognitive
impairment.

On March 10, 2015, Taxpayer A took a distribution from IRA B totaling Amount 1.
On March 12, 2015, Amount 1 was deposited into Taxpayer A’s non-IRA savings
account, Non-IRA Account C, which was maintained by Financial Institution E.
On March 30, 2015, Taxpayer A withdrew Amount 2 from IRA B, which he also
deposited into a non-IRA account with Financial Institution E.

Taxpayer A represents that, due to memory loss and confusion, he did not
understand the implications of withdrawing Amount 1 and Amount 2 from IRA B
and depositing these amounts into a non-IRA account. Taxpayer A represents
that his symptoms of cognitive impairment began in 2010 and became more
prominent beginning in January of 2015. Taxpayer A submitted supporting medical
documentation. Taxpayer A represents that Amount 1 and Amount 2 have not
been used for any other purpose.

Based on the above facts and representations, Taxpayer A requests a waiver of
the 60-day rollover requirement with respect to the distributions of Amount 1 and
Amount 2 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)).

3

201647014

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.

Regarding the distribution of Amount 1, the information and documentation
submitted are consistent with Taxpayer A’s assertion that his failure to accomplish
a rollover of Amount 1 within the 60-day period prescribed by section 408(d)(3)(A)
of the Code was due to cognitive impairment.

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, will be met with respect to the contribution of Amount 1 to an IRA,
such contribution will be considered rollover contribution within the meaning of
section 408(d)(3).

As indicated above, section 408(d)(3)(B) imposes a 1-year limitation on IRA to IRA
rollovers. Thus, Amount 2 cannot be rolled over into an IRA.

4

201647014

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
at . 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