Title

Text Resize
Print
Email
Subsribe to RSS Feed

Sunday November 18, 2018

Private Letter Ruling

Rollover from Decedent's Retirement Plan Permitted

GiftLaw Note:
Decedent died and was survived by his wife (Taxpayer) and children. Decedent was a state employee and a participant in a state-maintained qualified retirement plan (the Plan) at the time of his death. The Plan's proceeds were to be paid to the participant's designated beneficiary after the death of the participant. Decedent did not designate a beneficiary prior to his death. When there is no valid designated beneficiary, the entire benefit from the Plan is payable to the participant's estate. Decedent died intestate, but his children disclaimed their interests in his estate. Therefore, Taxpayer is the sole beneficiary of the estate. Taxpayer wishes to have the Plan pay the benefit to Decedent's estate and then, within 60 days of the distribution, roll the entire distribution to an IRA in Taxpayer's name. Taxpayer requested a ruling that the distribution and subsequent rollover will be excluded from Taxpayer's income under Sec. 402(c)(1).

Under Sec. 402(a), generally, distributions from a plan described in Sec. 401(a) are taxable to the distributee in the year of the distribution. Section 402(c)(1) allows any portion of an eligible rollover to an eligible retirement plan to be excluded from gross income. Section 402(c)(3)(A) requires the rollover to be made within 60 days of the distribution. Section 402(c)(4) defines an eligible rollover distribution as a distribution of all or part of the employee's balance in a qualified trust, with certain exceptions. Section 402(c)(8)(B)(i) includes IRAs as eligible retirement plans. Under Sec. 402(c)(9), if any distribution attributable to an employee is paid after the employee's death to the employee's spouse, the distribution will be treated as if the spouse was the employee. Here, Taxpayer is the sole beneficiary of Decedent's estate because Decedent's children disclaimed their interests. Taxpayer intends to roll the balance of the Plan over to an IRA within 60 days of the Plan's distribution to her. Therefore, the Service determined that any amount Taxpayer rolls over into an IRA within 60 days of distribution will be excluded from her income.

PLR 201839005 Rollover from Decedent's Retirement Plan Permitted

9/28/2018 (6/25/2018)

Dear * * *:

This is in response to your request dated February 5, 2018, in which your authorized representative, on your behalf, requested a ruling under section 402(c) of the Internal Revenue Code ("Code").

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

Decedent died in 2017 and was survived by his wife (Taxpayer) and his children (Decedent's Children). At the time of his death, Decedent was employed by State and was a participant in a qualified plan maintained by State. Under the terms of the Plan, upon a participant's death, Plan proceeds become payable to the participant's designated beneficiary. However, if a participant does not have a valid designated beneficiary in effect at the time of death, the Plan provides that the participant's benefit will be payable to the participant's estate. Because Decedent did not have a designated beneficiary in effect at the time of his death, the entire Plan benefit is payable to Decedent's estate.

Because Decedent died intestate, his estate would have been payable to Taxpayer and Decedent's Children under State law. However, Decedent's Children validly disclaimed their interests in Decedent's estate in the year of Decedent's death. Under State law, Decedent's Children are treated as though they predeceased the Decedent because of the disclaimers. As a result, Taxpayer is the sole beneficiary of Decedent's estate.

Taxpayer, as the surviving spouse of Decedent and sole beneficiary of Decedent's estate, intends to cause the Plan to pay Decedent's benefit to the estate and, within 60 days after the date of the distribution from the Plan, to roll the entire distribution from the Plan into an IRA set up and maintained in Taxpayer's name.

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

Taxpayer may roll over the Plan benefit into an IRA set up and maintained in Taxpayer's name provided that the rollover is completed within 60 days after the date the distribution is made from the Plan. To the extent that the amount distributed from the Plan is timely rolled over to that IRA, it will be excluded from Taxpayer's income under section 402(c)(1) of the Code.

Section 402(a)(1) of the Code provides, in general, that any amount actually distributed to any distributee by any employee trust as described in section 401(a) of the Code which is exempt from tax under section 501(a) of the Code shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 of the Code (relating to annuities).

Section 402(c)(1) of the Code provides, generally, that if any portion of an eligible rollover distribution from a qualified trust is transferred into an eligible retirement plan, the portion of the distribution so transferred shall not be includible in gross income in the taxable year in which paid.

Section 402(c)(3)(A) of the Code provides, generally, that except as provided in subparagraph (B) (hardship exception), section 402(c)(1) will not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed.

Similarly, section 1.402(c)-2, Q&A 11 of the Income Tax Regulations states that if an eligible rollover distribution is paid to an employee and the employee contributes all or any part of the eligible rollover distribution to an eligible retirement plan no later than the 60th day following the date the employee received the distribution, the amount contributed is not currently includible in gross income.

Section 402(c)(4) of the Code defines "eligible rollover distribution" as any distribution to an employee of all or any portion of the balance to the credit of an employee in a qualified trust except the following distributions:

(A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made -

(i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee's designated beneficiary, or

(ii) for a specified period of 10 years or more,

(B) any distribution to the extent the distribution is required under section 401(a)(9), and

(C) any distribution which is made upon the hardship of the employee.

Section 402(c)(5) of the Code provides that a transfer to an eligible retirement plan described in clause (i) or (ii) of section 402(c)(8)(B) of the Code resulting in any portion of a distribution being excluded from gross income under section 402(c)(1) of the Code shall be treated as a rollover contribution described in section 408(d)(3).

Under section 402(c)(8)(B)(i) of the Code, an individual retirement account described in section 408(a) is an eligible retirement plan.

Section 402(c)(9) of the Code provides that if any distribution attributable to an employee is paid to the spouse of the employee after the employee's death, section 402(c)(1) through (8) apply to the distribution in the same manner as if the spouse was the employee.

Because Decedent's Children disclaimed their interests in Decedent's estate under State law, Taxpayer is the sole beneficiary of Decedent's estate. Taxpayer intends to cause the Plan to distribute Decedent's entire benefit under the Plan to the estate and to roll over all of the proceeds to an IRA established and maintained in Taxpayer's name within 60 days after the date of the distribution from the Plan. Because Taxpayer is treated as an employee under section 402(c)(9), to the extent that she timely rolls over the amount of the distribution from the Plan, she may exclude that amount from income under section 402(c)(1).

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

Taxpayer may roll over the Plan benefit into an IRA set up and maintained in Taxpayer's name provided that the rollover is completed within 60 days after the date the distribution is made from the Plan. To the extent that the amount distributed from the Plan is timely rolled over to that IRA, it will be excluded from Taxpayer's income under section 402(c)(1) of the Code.

This ruling does not authorize the rollover of amounts that are required to be distributed by section 401(a)(9).

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

This letter is based on the representation that Taxpayer is the sole beneficiary of Dededent's estate under State law and the assumption that the IRA that will be established by Taxpayer to facilitate the rollover described herein meets the requirements of section 408 of the Code at all relevant times.

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

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,

Keith R. Kost
Senior Technician Reviewer
Qualified Plans Branch 2
Office of Associate Chief Counsel
(Tax Exempt and Government Entities)

cc:
* * *


Published October 12, 2018
Print
Email
Subsribe to RSS Feed

Previous Articles

Grants to Artists Not Taxable

Wedding Group Denied Tax-Exempt Status

Employer-Related Scholarships Awards Not Taxable

Allocations of GSTT Exemptions are Void

Athletic Organization Denied Exemption

scriptsknown

Shelby Harder, 2018
Dr. Irving Auld and Dorothy
Roher Auld Scholarship

"Many students take for granted what a university has to offer. However, I am thankful every single day for the opportunity to attend this prestigious school. At Lawrence, you have the ability to engage in Socratic debates about the world we live in at dinner, play recreational or NCAA sports, and talk one on one with brilliant professors. At Lawrence, you don't just 'learn' a subject, you are immersed in it. You dive into the liberal arts and these professors show you the beauty in it all, and how everything is tied together. I am a Biochemistry major with a soft spot for rocket science, philosophy, and evolution. Lawrence is my dream school, and it would have never been possible without the Dr. Irving Auld and Dorothy Roher Auld Scholarship. I am forever grateful for their generosity."

Juliana E. Olsen-Valdez, 2018
Carroll Family Scholarship

"Lawrence University is a great place for students looking to embrace their multi-interested approach to learning. As a Geology major, I have spent many long hours in laboratories. But, I have also had the opportunity to organize and lead students on outdoor backpacking trips, help build a stronger community for International students, participate in dialogues on campus initiatives, attend dozens of musical events, and study abroad in a field-based geology program, all while taking classes in a variety of academic spheres on campus. Lawrence, as an institution and student body, creates a collective of learners, listeners, and leaders who are continuously evolving their understanding of the world around them. I am fortunate to have the support of the Carroll Family Scholarship, so that I can say I am a part of this exceptional community too!"

Weiqi "Vicky" Liang, 2019
Marian H. Cuff Endowed Scholarship

"Lawrence is a special institution with nice people around the campus. I better myself by trying out different things and using new ways to think critically. Even though I am a Philosophy major, I have successfully taken classes in Anthropology, Biology, Economics, and Government. In addition, I still find many great extracurricular opportunities to explore, such as singing with Viking Chorale, even though I am not a music major. While having the great experience of volunteering at the elderly center last year, I became an elder advocacy coordinator at the Volunteer Community Service Center. At Lawrence, I've learned to handle difficult academic problems while looking forward to exploring possible opportunities. I am very grateful to be awarded the Marian H. Cuff Endowed Scholarship for every year I have been here, and appreciate that the scholarship has provided this wonderful Lawrence experience to me."

Anthony Cardella, 2018
Ansorge Family Scholarship

"I am so excited that I am able to attend Lawrence University. I know that I will make great progress studying piano with Dr. Michael Mizrahi. Since being at Lawrence I've already made a lot of progress and I really love it here. I am so grateful for the Ansorge Family Scholarship that made it possible for me to come to Lawrence because without it, I might not have been able to afford the cost of attending a school that is a great fit for me and a place where I will learn so much and go so far."

Milwaukee-Downer Scholarships and Professorships

Some of the many recipients of Milwaukee-Downer scholarships gather for a photo with Carolyn King Stephens M-D'62 and Marlene Crupi-Widen M-D'55 in January 2014 at the annual scholarship luncheon.

Rosamund Victoria Bille Adler Scholarship
Dr. Charles E. Albright Scholarship
Helen Daniels Bader Scholarship
James G. and Ethel M. Barber Scholarship
Catharine Beecher Endowed Fund for Downer Women
Bessie A. Bell Scholarship
Berk Scholarship
Frederick C. Best Scholarship
Beta Study Club Scholarship
Lynde Bradley Scholarship
Lucia R. Briggs-Alumnae Scholarship
Edith Lange Brooks Scholarship
Anne Barman Caldwell Scholarship
Alice Miller Chester Scholarship
City of Milwaukee Student Funds Scholarship
Milwaukee-Downer Class of 1940 Fund
Milwaukee-Downer Class of 1942 Fund
College Endowment Association Scholarship
Janet Cope Crawford Scholarship
Jessie Mabbott Daniels Scholarship
F. T. Day Scholarship
Rufus Dodge Scholarship
Julia P. Ely and Hannah R. Vedder Memorial Scholarship
General Endowed Scholarship - M-D College
Dr. Alfred W. and Mrs. Ada F. Gray Scholarship
Berenice E. Hess Scholarship Endowment
Lucille Ray Hibbard Scholarship
Belle Austin Jacobs Scholarship
Helen McDermott Jurack and Ronald J. Mason Scholarship
Marjorie S. Logan Scholarship
Nellie Maxwell Scholarship
S. Annabelle & Paul McGuire Scholarship
Memorial Scholarship Fund - Milwaukee-Downer
Milwaukee-Downer Class of 1953 Scholarship
Milwaukee-Downer Class of 1955 Scholarship
Milwaukee-Downer Class of 1956 Scholarship
Milwaukee-Downer Class of 1957 Scholarship
Milwaukee-Downer Class of 1958 and 1959 50th Reunion Scholarship
Milwaukee-Downer Club Scholarship
Milwaukee-Downer/Lawrence College Consolidation 50th Anniversary Scholarship
Francis Evelyn Kelley Morgan Memorial Scholarship
O'Neill-Anderson Family Scholarship Endowment
Elizabeth A. Olson Scholarship
Gilbert Haven Peirce, Sr. and Emma Elizabeth Manor Peirce Milwaukee-Downer Scholarship
Aleida J. Pieters Scholarship
Matilda Siefert Puelicher Scholarship
Elizabeth Ann Richardson Scholarship
William M. Ross Memorial Scholarship
Elizabeth Rossberg Scholarship
Charles Frederic Sammond Scholarship
Mildred L. Schroeder Scholarship
Sivyer Educational Fund for Women
Marion Merrill Smith Scholarship
Dr. Elizabeth A. Steffen Scholarship
W. Mead and Elizabeth McKone Stillman Scholarship
Strzelczyk Family Scholarship
Clare Scherf Sweetman Scholarship
Raymond H. and Jane K. Taylor Scholarship
Jerline E. Walfoort Memorial Scholarship
Barbara E. Wehr Fund
Harmony Weissbach Scholarship
Martha and Frances Wheelock Scholarship
James G. and Ethel M. Barber Professorship of Theatre and Drama
T. A. Chapman Professorship in Music
Alice G. Chapman Professorship in Physics
Alice G. Chapman Librarianship
Milwaukee-Downer College and College Endowment Association Professorship

Angela Small Fry Intia, 2019
Maurine Campbell Scholarship

"Thanks to the Maurine Campbell scholarship, I have been able to attend the amazing school that is Lawrence University. With the help from this scholarship, I have been able to pursue my dream career in chemistry working with the outstanding and extremely helpful faculty here. Even outside of chemistry I take the time for exploration into my interests and want to give back through my work as a resident life advisor, stock room assistant, and student supervisor at Bon Appetit. Everything I have learned here, academically or not has forever molded the person I am today."

LarryU Facebook Twitter Instagram YouTube

© Copyright 2018 Crescendo Interactive, Inc. All Rights Reserved
PRIVACY STATEMENT
This site is informational and educational in nature. It is not offering professional tax, legal, or accounting advice.
For specific advice about the effect of any planning concept on your tax or financial situation or with your estate, please consult a qualified professional advisor.