IRS written determination 201423044

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.

201423044

TREASURY
*
*
REVENUE SER

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

MAR 1 3 2014

T: EP.RA!T3

Uniform Issue List: 9100.00-00; 408A.00-00

Legend:

Taxpayer A

=

Custodian B

=

Amount 1

=

IRA X

=

Roth IRA Y

=

Dear ************:

This is in response to your request dated October 10, 2012, submitted on your behalf,
by your authorized representative, as supplemented by correspondence dated February
13, 2013 and November 17, 2013, in which you request relief under section 301.9100-3
of the Procedure and Administrative Regulations (the "P&A Regulations").

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

Taxpayer A owned IRA X, a traditional IRA described in section 408 of the Internal
Revenue Code (the "Code"), and maintained by Custodian B. In 2010, Taxpayer A
transferred shares of stock valued at Amount 1 (the "2010 Contribution") from IRA X to

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IRA Y, a Roth IRA described in section 408A of the Code, as a Roth IRA conversion in
2010. Roth IRA Y is also maintained by Custodian B.

Taxpayer A requests an extension of time to recharacterize the 2010 Contribution to
Roth IRA Y. Taxpayer A represents that as a result of medical conditions that affected
his memory and ability to comprehend financial matters, he was unable to understand
the implications of converting IRA X to a Roth IRA or to understand the advisability of
making a timely election to recharacterize such conversion.

As a result of certain specified medical conditions, Taxpayer A suffers from significant
lapses in memory and comprehension that have made him unable to manage his
financial affairs. Taxpayer A also has limited hearing and limited vision, which make
reading difficult and prevents reading small print or long documents.

Taxpayer A converted a portion of IRA X to a Roth IRA in 2009. Taxpayer A did not
understand that such conversion caused the converted amount to be taxable income,
and did not report it on his tax return. Taxpayer A received correspondence from the
IRS regarding the failure to report the conversion as income for 2009, a situation which
has since been resolved.

In 2010, Taxpayer A converted the remainder of IRA X, Amount 1, again believing that
such conversion was tax-free. As a result of the memory lapses and comprehension
difficulties stemming from his medical conditions, Taxpayer A had no recollection of the
communications he had received from the IRS regarding the 2009 conversion.
Because he did not remember the communications he had received from the IRS
regarding the 2009 conversion and mistakenly believed the conversion to be non-
taxable, Taxpayer A did not report the conversion on his 2010 tax return.

Taxpayer A filed his income tax return for 2010 on April 15, 2011. In 2012, Taxpayer
A's authorized representative discovered the 2010 Roth conversion, as well as the letter
from the IRS regarding the 2009 conversion. The failure to report the 2010 Roth
conversion (or to elect to recharacterize the contribution to IRA Y) was not discovered
by the Internal Revenue Service (the "Service"), but was reported by Taxpayer A's
authorized representative, who timely filed this request in October 2012.

Based on the foregoing facts and representation, you request a ruling that, pursuant to
section 301.9100-3 of the P&A Regulations, Taxpayer A be granted a period not to
exceed 60 days from the date of this ruling to recharacterize the 2010 Contribution to
Roth IRA Y as a contribution to a traditional IRA.

With respect to your request, section 408A(d)(6) of the Code and section 1.408A-5 of
the Federal Income Tax Regulations ("I.T. Regulations") provide that, except as
otherwise provided by the Secretary, a taxpayer may elect to recharacterize an IRA
contribution made to one type of IRA as having been made to another type of IRA by
making a trustee-to-trustee transfer of the IRA contribution, plus earnings, to the other

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type of IRA. In a recharacterization, the IRA contribution is treated as having been
made to the transferee IRA and not the transferor IRA. This recharacterization election
generally must occur on or before the date prescribed by law, including extensions, for
filing the taxpayer's Federal income tax return for the year of contribution.

Section 1.408A-5, Q&A-6, of the I.T. Regulations describes how a taxpayer makes the
election to recharacterize an IRA contribution. To recharacterize an amount that has
been converted from a traditional IRA to a Roth IRA: (1) the taxpayer must notify the
Roth IRA trustee of the taxpayer's intent to recharacterize the amount, (2) the taxpayer
must provide the trustee (and the transferee trustee, if different from the transferor
trustee) with specified information that is sufficient to effect the recharacterization, and
(3) the trustee must make the transfer.

Section 408A(d)(3)(C) provides that a conversion of a traditional IRA to a Roth IRA is
treated as a rollover from a traditional IRA to a Roth IRA.

Sections 301.9100-1, 301.9100-2, and 301.9100-3 of the P&A Regulations, in general,
provide guidance concerning requests for relief submitted to the Service on or after
December 31, 1997. Section 301.9100-1(c) provides that the Commissioner of Internal
Revenue, in his discretion, may grant a reasonable extension of the time fixed by a
regulation, a revenue ruling, a revenue procedure, a notice, or an announcement
published in the Internal Revenue Bulletin for the making of an election or application for
relief in respect of tax under, among others, Subtitle A of the Code.

Section 301.9100-2 of the P&A Regulations lists certain elections for which automatic
extensions of time to file are granted. Section 301.9100-3 generally provides guidance
with respect to the granting of relief with respect to those elections not referenced in
section 301.9100-2. The relief requested in this case is not referenced in section
301.9100-2.

Section 301.9100-3 of the P&A Regulations provides that applications for relief that fall
within section 301.9100-3 will be granted when the taxpayer provides sufficient
evidence (including affidavits described in section 301.9100-3(e)(2)) to establish that (1)
the taxpayer acted reasonably and in good faith, and (2) granting relief would not
prejudice the interests of the Government.

Section 301.9100-3(b)(1) of the P&A Regulations provides that a taxpayer will be
deemed to have acted reasonably and in good faith (i) if its request for section
301.9100-1 relief is filed before the failure to make a timely election is discovered by the
Service; (ii) if the taxpayer inadvertently failed to make the election because of
intervening events beyond the taxpayer's control; (iii) if the taxpayer failed to make the
election because, after exercising reasonable diligence (taking into account the
taxpayer's experience and the complexity of the return or issue), the taxpayer was
unaware of the necessity for the election; (iv) the taxpayer reasonably relied upon the
written advice of the Service; or (v) the taxpayer reasonably relied on a qualified tax

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professional, including a tax professional employed by the taxpayer, and the tax
professional failed to make, or advise the taxpayer to make, the election.

Section 301.9100-3(c)(1)(i) of the P&A Regulations provides that the interests of the
Government are ordinarily prejudiced if granting relief would result in the taxpayer
having a lower tax liability in the aggregate for all taxable years affected by the election
than the taxpayer would have had if the election had been timely made (taking into
account the time value of money).

Section 301.9100-3(c)(1)(ii) of the P&A Regulations further provides that the interests of
the Government are ordinarily prejudiced if the taxable year in which the regulatory
election should have been made or any taxable years that would have been affected by
the election had it been timely made are closed by the statute of limitations before the
taxpayer's receipt of a ruling granting relief under this section.

In the present case, due to medical conditions that affected Taxpayer A's memory and
comprehension, he was unaware of the availability or advisability of making an election
to recharacterize the 2010 Contribution to Roth IRA Y. Due to his memory and
comprehension problems, Taxpayer A was under the mistaken belief that a conversion
to a Roth IRA was not taxable. Therefore, he was unaware of the need to make the
election. When Taxpayer A's authorized representative discovered the situation,
Taxpayer A filed this request for section 301.9100 relief in a timely manner, and before
the Service discovered the failure to make the election.

Under the circumstances described above, Taxpayer A satisfies the requirements of
section 301.9100-3(b)(1) of the P&A Regulations. Accordingly, we rule that, pursuant to
clauses (i) and (ii) of section 301.9100-3 of the P&A Regulations, Taxpayer A is granted
a period not to exceed 60 days from the date of this letter ruling to recharacterize the
2010 Contribution to Roth IRA Y as a contribution to a traditional IRA.

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 assumes that the above IRAs qualify under either section 408 of the Code or
section 408A of the Code at all relevant times.

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 by others as precedent.

A copy of this letter has been sent to your authorized representative in accordance with
a power of attorney on file with this office.

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If you wish to inquire about this ruling, please contact *************** (ID # ********** at

☒

Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,
fore Be what

Laura B. Warshawsky, Manager,
Employee Plans Technical Group 3

Enclosures:
Deleted copy of this letter
Notice of Intention to Disclose

Cc: