IRS written determination 201437029

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
JUN 0 5 Z014
Uniform Issue List: 408.03-00
Legend:
Taxpayer A
=
Decedent 8
=
IRAC
=
Custodian D
=
Trust E
=
Dear:
'201437029
This is in response to your request dated July 24, 2013, submitted by your
authorized representative, as supplemented by correspondence dated December
30, 2013, and
April24 and 30, 2014, in which you request a ruling that IRA C will
not be treated as an inherited IRA within the meaning
of section 408(d) of the
Internal Revenue Code (the "Code")
With respect to you, and that you be
permitted to rollover over the proceeds
of IRA C into an IRA maintained in your
own name.
The following facts and representations have been submitted under penalty
of
perjury in support of the rulings requested:
Taxpayer A is the surviving spouse
of Decedent 8, who died on February 29,
2012, having attained age 70%. At his death, Decedent B maintained an
individual
re~irement account, IRA C, with Custodian D.
Taxpayer A represents that Decedent 8 had not designated a beneficiary for IRA
C. Consistent with Custodian D's adoption agreement, Custodian D will
distribute Decedent B's proceeds to his estate. Decedent B died testate, and his
Last
Will and Testament ("Will") named Trust E as beneficiary. Decedent
8's Will

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201437029
appoints Taxpayer A as his Personal Representative, and she represents that
she intends to assign
all
of Decedent B's estate assets to Trust E, including
assigning a beneficial interest
in IRA C to Trust E. ·
Trust E appointed Taxpayer A as Successor Trustee
of all Trusts created under
the Trust. Trust E provides that upon Decedent B's death, Trust E is divided into
two shares, the Marital
Share and the Residuary Trust. Taxpayer A is the sole
beneficiary
of the Marital Share portion of Trust E. Trust E provides that the
Marital Share is to be funded with a pecuniary amount which, if allowed as a
federal estate tax marital deduction, would result in the least possible federal
estate tax payable at Decedent B's death. Taxpayer A, as Successor Trustee
determines which estate assets
will fund the Marital Share portion
of Trust E with
the remainder
of estate assets placed in the Residuary Trust. Taxpayer A
represents that she will transfer IRA C to the Marital Share portion
of Trust E.
Taxpayer further represents that the Residuary Trust will be sufficiently funded
with non-IRA C assets to satisfy specific bequests
of Decedent B.
As sole trustee of Trust E, Taxpayer A proposes to either transfer IRA C directly
into an IRA in her name, by way of a trustee-to-trustee transfer from Trust E, or
to make a distribution of the assets of IRA C to herself as beneficiary of the Trust
E under her power as Successor Trustee. It is Taxpayer A's intention to roll over
the distribution into one or more
IRAs set up and maintained in her own name.
Based on the facts and representations, you request the following rulings:
1. That the proceeds of IRA C, which will be distributed to Trust E and
subsequently paid to Taxpayer A shall not constitute an inherited IRA
within meaning
of section 408(d)(3)(C) of the Code, with respect to
Taxpayer A; and
2. That Taxpayer A, as the surviving spouse of Decedent B, may transfer
IRA C directly into
an IRA in her name, by means of trustee-to-trustee
transfer; and
3. If IRA Cis transferred by means of a trustee-to-trustee transfer, that the
trustee-to-trustee transfer will be exempt from the withholding
requirements
of section 3405(c)(2) of the Code; or in the alternative
4. Taxpayer A, as the surviving spouse
of Decedent B, may roll over the IRA
C distribution she will receive into an IRA set up and maintained in her
name; and
5. Taxpayer A is not required to include IRA C proceeds in income for federal
income tax purposes for the year
in which the IRA C proceeds are
distributed and rolled over into the IRA set up and maintained in Taxpayer
A's name, provided the proceeds are timely rolled over into an IRA set up
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201437029
and maintained in the name of Taxpayer A; and
6. If Taxpayer A appoints IRA B to herself and receives the proceeds of IRA
B, she will be treated as the payee or distributee thereof for purposes of
section 408(d) of the Code.
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 defines and provides the rules applicable to IRA
rollovers.
Section 408(d)(3)(A)
of the Code provides that section 408(d)(1) of the Code
does not apply
to any amount paid or distributed out of an IRA to the individual
for whose benefit the IRA is maintained if:
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
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) of the Code
does not
apply to any amount described in section 408(d)(3)(A)(i)
of the Code
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)
of the Code from an IRA which was not
includible
in gross i.ncome because of the application of section 408(d)(3) of the ·
Code.
Section 408(d)(3)(C)(i)
of the Code provides, in summary, that the rollover rules
of section 408(d)(3) do not apply to inherited IRAs.
Section 408(d)(3)(C)(ii)
of the Code provides that the term "inherited IRA" means
an IRA aquired by an individual, other than the IRA owner's spouse, as a result
of
the death of the IRA owner.
Section 1.408-8
of the Income Tax Regulations, Question and Answer 5 ("Q&A-
5") provides that a surviving spouse
of an IRA owner may elect to treat the
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201437029
spouse's entire interest as a beneficiary in an 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. If a
trust is named as beneficiary
of the IRA, this requirement is not satisfied even if
the spouse is the sole beneficiary
of the trust.
Generally, if the proceeds
of a decedent's IRA are payable to a trust, and are
paid to the trustee
of the trust, who then pays them to the decedent's surviving
spouse as the beneficiary
of the trust, the surviving spouse is treated as having
received the IRA proceeds from the trust and not from the decedent. Accordingly,
the surviving spouse, in general, is not eligible to roll over the distributed IRA
proceeds into his/her own IRA.
However, the general rule will not apply in a case where the IRA has not yet
been distributed and the surviving spouse as the sole trustee
of the decedent's
trust has sole authority and discretion under trust language to pay the
IRA
proceeds to him/her.
In such a case, the surviving spouse may roll over the
proceeds into an
IRA set up and maintained
in his/her name within 60 days of the
date the proceeds are distributed from the IRA.
In this case, Decedent B's estate is the default beneficiary
of IRA C. Decedent
B's Will names Trust E as the beneficiary
of his estate. As the Personal
Representative
of Decedent B's estate, Taxpayer A intends to transfer IRA C to
Trust
E. Under the terms of Trust E, and in her powers as sole Successor
Trustee, Taxpayer A intends to distribute the proceeds from IRA C to herself.
Taxpayer A represents that within 60 days
of distributing the IRA C proceeds,
she will roll them over from Trust E to an IRA set up in her own name.
Therefore, with respect to your ruling requests, we conclude as follows:
1. The proceeds of IRA C, which will be distributed to Trust E and
subsequently paid to Taxpayer A as beneficiary
of Trust E will not be treated as
an inherited IRA within the meaning
of section 408(d) of the Code with respect to
Taxpayer
A
2. Taxpayer A is eligible to roll over or have transferred, by means of a
trustee-to-trustee transfer, a distribution
of the proceeds of IRA C into an IRA set
up and maintained in her own name, as long as the rollover
of such distribution
occurs no later than the 60
1
h
day from the date the distribution is made from the
IRA
C.
3. Taxpayer A is not required to include IRA C proceeds in income for
federal income tax purposes for the year
in which the IRA C proceeds are
distributed and rolled over into the IRA set up and maintained
in Taxpayer A's
name, provided the proceeds are timely
rolled over into an IRA set up and
maintained in the name of Taxpayer A
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20143?029
4. If Taxpayer A appoints IRA C to herself and receives the proceeds of
IRA C, she will be treated as the payee or distribute thereof for purposes of
section 408(d) of the Code.
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
letter is based
on the assumption that IRA C met the requirements of
section 408 of the Code at all relevant times, and that Trust E is valid under
applicable state law. It also assumes that any rollover IRA established by
Taxpayer
A will also meet the requirements of section 408 of the Code at all
relevant times.
This
letter 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 ruling
is being sent to your authorized representative.
If you have any questions, please contact (I. D.# ) by phone at ~
or fax at Please address all correspondence to SE:T:EP:RA:T1.
Enclosures:
Deleted Copy
of Ruling Letter
Notice
of Intention to Disclose
cc:
Sincerely yours,
Carlton
A. Watkins, Manager
Employee Plans Technical Group 1
5