U.I.L. 408.03-00
Date: June 22, 2010
Refer Reply To: SE:T:EP:RA:T4
Dear * * *:
This is in response to a letter dated June 22, 2009, as supplemented by
correspondence dated October 7, November 5 and November 9, 2009, and January 22
and March 3, 2010, submitted on your behalf by your authorized representative,
requesting a waiver of the 60-day rollover requirement contained in section
408(d)(3) of the Internal Revenue Code ("Code"). The following facts and
representations are made under penalties of perjury in support of your ruling
request.
Taxpayer A, age 77, represents that he received a distribution of Amount N
from IRA X, an Individual Retirement Arrangement he maintained with Financial
Institution C. Taxpayer A asserts that his failure to accomplish a rollover of
Amount N into an IRA within the 60-day period prescribed by section 408(d)(3) of
the Code was due to his mental condition which severely impaired his ability to
manage his financial affairs. Taxpayer A further asserts [*2] that Amount N
has not been used for any other purpose.
IRA X was spread among nine different investment funds. Each fund had an
identifying title and fund number which distinguished one fund from the other.
Taxpayer A received a separate written statement for the transactions of each
fund. The statement for each fund identified the investment as an IRA on behalf
of Taxpayer A. Each statement showed an account number common to all nine funds.
In addition to IRA X, Taxpayer A maintained a non-IRA account (Account Y)
with Financial Institution C.
On Date 1, Taxpayer A gave Financial Institution C instructions by telephone
to withdraw the account balance (Amount N) of eight of the nine funds held by
IRA X intending to transfer Amount N into the ninth fund of IRA X from which no
withdrawal was made. Documentation shows that although IRA X and Account Y did
not have the same account number, the ninth fund of IRA X and Account Y had the
same title and fund number.
Due to his diminished capacity as a result of prescription medication he was
taking, Taxpayer A became confused and the distribution was instead transferred
into Account Y, the non-IRA money market account. Financial Insititution C
[*3] deducted 10 percent Federal tax withholding from the distribution,
resulting in Amount O being deposited in Account Y.
While preparing Taxpayer A's tax return for Year 1, Taxpayer A's accountant
discovered that Amount N had been withdrawn from IRA X. Such discovery occurred
after the 60-day period for rolling over Amount N into another IRA had expired.
Documentation, including a letter from Taxpayer A's treating physician,
states that Taxpayer A suffered from diminished mental capacity at the time of
the distribution of Amount N from IRA X and during the 60-day period following
the distribution due to the side effects of medication prescribed to Taxpayer A
which severely impaired Taxpayer A's ability to manage his financial affairs.
Based on the facts and representations presented in this letter, you request
that the Service waive the 60-day rollover requirement with respect to the
distribution of Amount N from IRA X.
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 [*4] defines, and 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 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
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 [*5] 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) of the Code.
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(d)(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) 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. Only distributions that occurred
after December 31, 2001, are eligible for the waiver under section 408(d)(3)(I)
of the Code.
Revenue Procedure 2003-16, 2003-4 I.R.B. 359, provides that in determining
whether to grant a waiver of the 60-day rollover requirement pursuant to section
408(d)(3)(I), the Service will consider all relevant facts and circumstances,
including : (1) errors committed by a financial institution; [*6] (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 his assertion that on Date 1, he intended to transfer Amount N
into the ninth fund of IRA X.
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 N from IRA X. Taxpayer A is granted a period of 60 days from the issuance
of this ruling letter to contribute Amount N into an IRA.
Provided all other requirements of section 408(d)(3) of the Code except the
60-day requirement are met with respect to such contribution amount 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 to Taxpayer A by section 401(a)(9) of the Code.
This ruling also does not authorize [*7] the rollover of interest or
dividends earned on Amount O while Amount O was held in Account Y.
This ruling assumes that IRA X satisfies the qualification requirements of
section 408 of the Code at all times relevant to this transaction.
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 ruling 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.
Pursuant to a power of attorney on file with this office, a copy of this
letter ruing is being sent to your authorized representative.
If you wish to inquire about this ruling, please contact * * *, I.D. # * * *,
by telephone at * * *. Please address all correspondence to SE:T:EP:RA:T4.
Sincerely yours,
Laura B. Warshawsky, Manager
Employee Plans Technical Group 4
