Two Private Letter Rulings ("PLR's") regarding requests for extension of the 60-day IRA rollover period arrive at different results based on emotional and financial difficulties faced by the taxpayers. In PLR 201130013, a taxpayer withdrew an amount from his IRA and deposited it into an account he believed to be a new IRA account. He subsequently got divorced and experienced severe depression and emotional distress. Almost one year later, after he realized he had not properly rolled over his IRA account into a new IRA, he requested a waiver of the rule requiring that rollovers be completed within 60 days of the initial withdrawal. The IRS granted this waiver under IRC §408(d)(3)(I), permitting waiver where the failure to waive the requirement would be against equity or good conscience, including events beyond the reasonable control of the individual requesting the waiver, on account of the emotional difficulties faced by the taxpayer.
In contrast, in PLR 201130014, the taxpayer withdrew an amount from his IRA after losing his job. Although he intended to roll over the account to a new IRA pending a new job or sale of his home, within a month of the withdrawal he suffered a fire in his house, further exasperating his financial situation. He then used some of the proceeds from the IRA account during the pending insurance settlement and deposited the full amount into a new IRA six months after the initial withdrawal. Here the IRS denied the taxpayer's request for a waiver because it perceived the IRA withdrawal as effectively a short-term loan to cover personal living expenses. The IRS stated that use of IRA proceeds as a loan is not consistent with the IRA rollover requirements and did not, therefore, justify the waiver in this case.