Sole-heir spouse could roll an estate-received IRA into his own IRA

Plain-English summary

A decedent's IRA named no beneficiary, so its balance was payable to the estate. The surviving spouse was both the estate's sole heir and its sole administrator. The IRS treated the spouse as the payee or distributee for rollover purposes and ruled that the account would not be an inherited IRA with respect to him. He could distribute the IRA through the estate and roll the proceeds into one or more IRAs in his own name within 60 days. Amounts timely rolled over would not be included in gross income, subject to the other section 408(d)(3) requirements and the one-rollover-per-year rule.

Ruling snapshot

• Question: Can a surviving spouse who is the estate's sole heir and administrator roll an IRA payable to the estate into his own IRA?
• Outcome: approved, if the rollover occurs within 60 days and all other section 408(d)(3) requirements are met
• Key authorities: IRC §§ 72, 408(d)(3); Treas. Reg. § 1.408-8, Q&A-5

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201931006                                             Third Party Communication: None
Release Date: 8/2/2019                                        Date of Communication: Not Applicable
Index Number: 408.03-00
                                                              Person To Contact:
-----------------------                                       -----------------, ID No. ------------------
------------------------------                                Telephone Number:
---------------------------------------                       ----------------------
                                                              Refer Reply To:
                                                              CC:EEE:EB:QP3
                                                              PLR-133506-18
                                                              Date:
                                                              May 7, 2019




Taxpayer A         =   -----------------------
Decedent B         =   ----------------------
Custodian C        =   -----------------------------
IRA D              =   -------------------------------------------
Date 1             =   ---------------------------
Date 2             =   -------------------


Dear --------------:

This letter responds to your request dated October 24, 2018, as supplemented by
correspondence dated March 12, 2019, submitted on your behalf by your authorized
representative, in which you request rulings that IRA D will not be treated as an
inherited IRA under section 408(d) of the Internal Revenue Code, and that you will be
permitted to roll over the proceeds of IRA D to an IRA in your own name.

The following facts and representations were submitted under penalties of perjury on
your behalf:

Decedent B (born on Date 1) established IRA D, which was maintained by Custodian C.
At the time of Decedent B’s death, IRA D did not have a designated beneficiary. You
represent that Custodian C provides that if no beneficiary is designated for IRA D, the
account balance of IRA D remaining at Decedent B’s death is payable to Decedent B’s
estate.

Decedent B died intestate on Date 2. As provided for under the relevant state law,
Taxpayer A, as surviving spouse of Decedent B, is the sole heir to Decedent B’s estate.
Taxpayer A is also the sole administrator of the estate. Taxpayer A intends to distribute
PLR-133506-18                               2

IRA D to the estate. As administrator of Decedent B’s estate, Taxpayer A will pay the
proceeds of IRA D to himself. Within 60 days of receipt, Taxpayer A will roll over the
proceeds of IRA D into one or more IRAs in his own name.

Based on the preceding facts Taxpayer A requests the following rulings:

    1. Taxpayer A will be treated, for purposes of section 408(d)(3), as the payee or
      distributee of the proceeds from IRA D;

    2. IRA D will not be treated as an inherited IRA within the meaning of section
      408(d)(3)(C) with respect to Taxpayer A;

    3. Taxpayer A will be eligible to roll over the proceeds from IRA D to an IRA set up
      and maintained in his own name pursuant to section 408(d)(3)(A)(i), as long as
      the rollover occurs no later than 60 days after the proceeds are received by
      Taxpayer A in his capacity as administrator of Decedent B’s estate; and

    4. Taxpayer A will not be required to include in gross income for federal tax
      purposes, for the year in which the distribution of IRA D is made, any portion of
      the proceeds distributed from IRA D that are timely rolled over to an IRA, set up
      and maintained in Taxpayer A’s name.

With respect to your ruling requests, section 408(d)(1) 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) provides that section 408(d)(1) does not apply to a rollover
contribution if such contribution satisfies the requirements of sections 408(d)(3)(A) and
(d)(3)(B).

Section 408(d)(3)(A) 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 account 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 he receives the payment or distribution; or (ii) the entire amount received
(including money and any other property) is paid into an eligible retirement plan 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) 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 one-year period ending on the day of such receipt such individual received
PLR-133506-18                                3

any other amount described in section 408(d)(3)(A)(i) from an IRA which was not
includible in his gross income because of the application of section 408(d)(3).

Section 408(d)(3)(C)(i) provides, in pertinent part, that, in the case of an inherited IRA,
section 408(d)(3) shall not apply to any amount received by an individual from such
account (and no amount transferred from such account to another IRA shall be
excluded from gross income by reason of such transfer), and such inherited account
shall not be treated as an IRA for purposes of determining whether any other amount is
a rollover contribution.

Section 408(d)(3)(C)(ii) provides that an IRA shall be treated as inherited if the
individual for whose benefit the account is maintained acquired such account by reason
of the death of another individual, and such individual was not the surviving spouse of
such other individual.

Section 1.408-8, Q&A-5, of the Income Tax Regulations, provides that a surviving
spouse of an IRA owner may elect to treat the spouse’s entire interest as a beneficiary
in an individual’s IRA as the spouse’s own IRA. In order to make this election, the
spouse must be the sole beneficiary of the IRA and have an unlimited right to withdraw
amounts from the IRA. If a trust is named as beneficiary of the IRA, this requirement is
not satisfied even if the spouse is the sole beneficiary of the trust.

In this case, Decedent B’s interest in IRA D passed to her estate. Under these
circumstances, Taxpayer A, as the surviving spouse of Decedent B, would not generally
be permitted to treat the IRA as his own, because he was not named the beneficiary of
Decedent B’s IRA. However, because Taxpayer A is the administrator and sole heir to
Decedent B’s estate, for purposes of applying section 408(d)(3)(A) to the IRA, Taxpayer
A is effectively the individual for whose benefit the account is maintained. Accordingly,
if Taxpayer A receives a distribution of the proceeds of the IRA, he may roll over the
distribution into his own IRA.

Therefore, with respect to your ruling requests, we conclude that:

    1. Taxpayer A will be treated, for purposes of section 408(d)(3), as the payee or
      distributee of the proceeds from IRA D;

    2. IRA D will not be treated as an inherited IRA within the meaning of section
      408(d)(3)(C) with respect to Taxpayer A;

    3. Taxpayer A will be eligible to roll over the proceeds from IRA D to an IRA set up
      and maintained in his own name pursuant to section 408(d)(3)(A)(i), as long as
      the rollover occurs no later than 60 days after the proceeds are received by
      Taxpayer A in his capacity as administrator of Decedent B’s estate, and all other
      applicable section 408(d)(3) requirements are satisfied; and

    4. Subject to section 408(d)(3)(B), Taxpayer A will not be required to include in
PLR-133506-18                                 4

       gross income for federal tax purposes, for the year in which the distribution of
       IRA D is made, any portion of the proceeds distributed from IRA D that are timely
       rolled over to an IRA set up and maintained in Taxpayer A’s name.

Except as specifically provided herein, no opinion is expressed or implied concerning
the federal tax consequences of any other aspects of any transaction or item discussed
or referenced in this letter.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalties of perjury statement
executed by an appropriate party, as specified in Rev. Proc. 2019-1, 2019-1 I.R.B. 1,
§ 7.01(16)(b). This office has not verified any of the material submitted in support of the
request for ruling, and such material is subject to verification on examination. The
Associate office will revoke or modify a letter ruling and apply the revocation
retroactively if: there has been a misstatement or omission of controlling facts; the facts
at the time of the transaction are materially different from the controlling facts on which
the ruling was based; or, in the case of a transaction involving a continuing action or
series of actions, the controlling facts change during the course of the transaction. See
Rev. Proc. 2019-1, § 11.05.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.


                                       Sincerely,



                                       Ingrid Grinde
                                       Senior Tax Law Specialist
                                       (Qualified Plans Branch 3)
                                       Employee Benefits, Exempt Organizations, and
                                       Employment Taxes




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