Surviving spouse could roll estate-paid IRA proceeds into own IRA

Plain-English summary

An IRA owner died intestate after the owner's estate had become the IRA beneficiary. The surviving spouse was the estate's sole administrator and, under state law, was treated as its sole beneficiary. The IRS treated the spouse as the payee or distributee of IRA proceeds paid through the estate and ruled that the IRA was not an inherited IRA with respect to the spouse. The spouse may roll the proceeds, other than required minimum distributions, into one or more IRAs in the spouse's own name within 60 days after the estate receives them. A timely rollover is not included in gross income unless it is made to a Roth IRA.

Ruling snapshot

• Question: May the surviving spouse roll IRA proceeds paid through the decedent's estate into an IRA in the spouse's own name?
• Outcome: Approved, subject to the 60-day rollover deadline and other statutory limits
• Key authorities: IRC §§ 401(a)(9), 408(d)(1), and 408(d)(3); Treas. Reg. § 1.408-8(c)(1)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202519010 Third Party Communication: None
Release Date: 5/9/2025 Date of Communication: Not Applicable
Index Number: 408.00-00, 408.03-00,
408.05-00 Person To Contact:
--------------------, ID No. -----------------
Telephone Number:
-------------------- -------------------
------------------------- Refer Reply To:
---------------------------- CC:EEE:EB:QP1
PLR-121084-24
Date: February 10, 2025

Legend:

Decedent A = ---------------------------------------------------------
Taxpayer B = -----------------------------------------------
Company C = ---------------------------------------
Estate E = -------------------------------------------------------------------
State S = ----------------
IRA X = ---------------------------------------------------------------------------------------------
--------------------------------------------------------------------
Date 1 = -----------------------
Date 2 = ---------------------------
Date 3 = ------------------

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

This is in response to a request for a letter ruling under sections 408(d)(1) and (d)(3) of
the Internal Revenue Code, submitted on your behalf by your authorized representative
in correspondence dated August 2, 2024, and updated by correspondence dated
January 3, 2025.

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

On Date 1, Company C issued Decedent A an individual retirement annuity. On Date 1,
Decedent A designated Decedent A’s spouse, Taxpayer B, as the sole beneficiary of
IRA X. Upon the later transfer of IRA X to a different custodian, Decedent A’s estate,
Estate E, became the sole beneficiary of IRA X.

Decedent A died intestate on Date 2, survived by Taxpayer B and Decedent A’s and
Taxpayer B’s two children.
PLR-121084-24 2

On Date 3, a probate court in State S authorized Taxpayer B to solely administer Estate
E.

Under the law of State S, Taxpayer B is treated as the sole beneficiary of Estate E
because all surviving descendants of Decedent A are also descendants of Taxpayer B,
and Taxpayer B has no other descendants.

As sole administrator of Estate E, Taxpayer B intends to request Company C to issue a
lump sum payment of the IRA X benefit to Estate E, and then to receive the proceeds
as the sole beneficiary of Estate E. Taxpayer B intends to roll over the proceeds, within
60 days of the date the proceeds are received by the Estate, to an individual retirement
arrangement (IRA) maintained in Taxpayer B’s name.

Requested Rulings

Based on the above facts and representations, you, through your authorized
representative, request the following rulings:

1. The proceeds of IRA X to be paid by Taxpayer B will be treated as being paid directly
   from IRA X to Taxpayer B, and as a result, Taxpayer B will be treated as the payee or
   distributee of IRA X for purposes of section 408(d)(1).

2. IRA X will not be treated as an inherited IRA within the meaning of section 408(d)
   with respect to Taxpayer B.

3. Taxpayer B is eligible to roll over IRA X into an IRA set up and maintained in
   Taxpayer B’s own name as long as the rollover of that distribution occurs no later than
   the 60th day after the date the distribution is received by Taxpayer B as administrator of
   Estate E.

4. Taxpayer B will not be required to include in gross income for federal income tax
   purposes for the year in which the distribution of IRA X, and subsequent rollover is
   made, any portion of the amounts from IRA X received by Estate E and rolled over to
   the IRA set up and maintained in Taxpayer B’s name.

Law

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)(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 IRA is maintained if:
(i) the entire amount received (including money and any other property) is paid into an
PLR-121084-24 3

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) 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)(C)(i) provides 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 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 the term “inherited IRA” means an IRA acquired by
an individual, other than the IRA owner’s spouse, as a result of the death of the IRA
owner.

Section 408(d)(3)(D) permits the rollover of a portion of the amount paid or distributed
from an IRA, providing that if the amount paid or distributed out of an IRA would meet
the requirements of subparagraph (A) but for the fact that the entire amount was not
paid into an eligible plan, such amount shall be treated as meeting the requirements of
subparagraph (A) to the extent it is paid into an eligible plan within the applicable 60 day
period.

Section 408(d)(3)(E) provides that the rollover provisions of section 408(d) do not apply
to any amount required to be distributed under section 408(a)(6) (regarding required
minimum distributions under section 401(a)(9)).

Section 408A(d)(3) contains a special rule that applies for a rollover to a Roth IRA from
a non-Roth IRA, which provides in part that, notwithstanding section 408(d)(3), there
shall be included in gross income any amount which would be includible were it not part
of a qualified rollover contribution.

Section 1.408-8(c)(1) provides, in part, that a surviving spouse of an individual may
elect to treat the spouse’s entire interest as a beneficiary in the 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.
PLR-121084-24 4

Analysis

Under the facts presented, the IRA X benefit remaining at Decedent A’s death is
payable to Decedent A’s estate, Estate E. Under these circumstances, Taxpayer B, as
Decedent A’s surviving spouse, is not permitted to treat IRA X as Taxpayer B’s own IRA
because Estate E is the beneficiary of IRA X. But because Taxpayer B is the sole
administrator of Estate E, is treated as the sole beneficiary of Estate E during Taxpayer
B’s lifetime, and has the authority to distribute all of Estate E’s assets, for purposes of
applying section 408(d)(3)(A), Taxpayer B is effectively the individual for whose benefit
IRA X is maintained. Accordingly, if Taxpayer B receives a distribution of IRA X’s
proceeds, Taxpayer B may roll over the distribution (other than amounts required to
have been distributed or to be distributed in accordance with section 401(a)(9)) into one
or more IRAs established and maintained in Taxpayer B’s name.

Therefore, with respect to your first ruling request, the IRA X proceeds that are paid to
Estate E and then received by Taxpayer B and timely rolled over to an IRA or IRAs set
up and maintained in Taxpayer B’s name may be treated as paid or distributed to
Taxpayer B under sections 408(d)(1) and (d)(3).

With respect to your second ruling request, Taxpayer B is the surviving spouse of
Decedent A. Therefore, IRA X is not treated as an inherited IRA for purposes of section
408(d)(3).

With respect to your third ruling request, as concluded above, Taxpayer B may roll over
the IRA X proceeds paid to Estate E and then received by Taxpayer B to an IRA or
IRAs set up and maintained in Taxpayer B’s name, provided that the rollover occurs no
later than the 60th day after the day the proceeds are received by Estate E.

With respect to your fourth ruling request, except in the case of a rollover to a Roth IRA,
Taxpayer B will not be required to include in Taxpayer B’s gross income any portion of
the IRA X proceeds timely rolled over to an IRA set up and maintained in Taxpayer B’s
name.

Rulings

Thus, with respect to your ruling requests, we conclude as follows:

1. Taxpayer B will be treated for purposes of section 408(d)(1) and (d)(3) as the payee
   or distributee of the proceeds from IRA X.

2. IRA X will not be treated as an inherited IRA, within the meaning of section
   408(d)(3)(C), with respect to Taxpayer B.
   PLR-121084-24 5

3. Taxpayer B will be eligible to roll over the proceeds from IRA X into an IRA or IRAs
   set up and maintained in Taxpayer B’s name, as long as the rollover occurs no later
   than the 60th day after the date the proceeds are paid to Estate E.

4. Except in the case of a rollover to a Roth IRA, Taxpayer B will not be required to
   include in Taxpayer B’s gross income any portion of the IRA X proceeds timely rolled
   over to an IRA set up and maintained in Taxpayer B’s name.

This letter assumes that IRA X has satisfied the requirements of section 408 at all
relevant times. It also assumes that the rollover IRA or IRAs set up by Taxpayer B will
satisfy the requirements of section 408 at all relevant times.

The rulings contained in this letter are based upon information and representations
submitted by Taxpayer B and accompanied by a penalties of perjury statement
executed by Taxpayer B, as specified in Rev. Proc. 2025-1, 2025-1 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. 2025-1, § 11.05.

Except as expressly provided above, no opinion is expressed or implied concerning the
federal income tax consequences of any other aspects of any transaction or item of
income described in this letter ruling.

This letter is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that
it may not be used or cited as precedent.
PLR-121084-24 6

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,


                                       /s/ Neil Sandhu

                                       ______________________________
                                       Neil Sandhu
                                       Senior Technician Reviewer
                                       Qualified Plans Branch 1
                                       Office of the Associate Chief Counsel
                                       (Employee Benefits, Exempt Organizations,
                                       and Employment Taxes)

cc: ----------------------------------
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