IRS waives 60-day rollover requirement where gambling addict withdrew IRA funds without knowledge or consent of IRA owner

The IRS has waived the 60-day IRA rollover rule for a spouse whose husband withdrew funds from her individual retirement account (IRA) without her knowledge or consent, according to an IRS letter ruling. The wife learned that her husband had a gambling addiction and discovered the missing IRA funds after the 60-day rollover period had expired.

The taxpayer and her husband were married in 2001. The husband was an attorney who worked as a business consultant for and was a partner of a certified public accounting firm. As part of their estate planning, the couple executed powers of attorney documents. The wife understood and intended that the power of attorney was only for when she was incapacitated, disabled, or otherwise unable to manage her own financial decisions. Sometime later, the husband took a distribution from his wife’s IRA. The husband told the IRA trustee that he was acting in his capacity as his wife’s power of attorney and that he needed the funds for his wife’s medical expenses. After discovering that her husband had a gambling problem, she revoked the power of attorney she had given to her husband. She later found out that the husband had taken the distribution from her IRA. The wife requested that the IRS waive the 60-day rollover rule.

The wife gave the IRS a statement from her husband’s treating physician that he had a gambling addiction. The wife also told the IRS that her husband had apparently lost significant amounts while gambling. The IRS determined that the documentation submitted by the wife was consistent with her assertion that her failure to accomplish a timely rollover was caused by her husband’s withdrawal of the IRA funds without her knowledge or consent. The IRS, therefore, waived the 60-day rollover requirement.

Source: IRS Letter Ruling 201324022.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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