The tax code does not give the IRS any authority to waive the 10% early-distribution penalty for any reason other than the reasons listed in the reference provided by JohnB5677 .
Even if your spouse was able to come up with funds to be able to complete a rollover of the distribution to avoid the penalty and to continue to defer the taxable income, the 60-day rollover deadline has passed. The circumstances are not one of the IRS-listed reasons listed in IRS Rev. Proc. 2020-46 that would permit your spouse to self-certify that the rollover would qualify for a waiver of the 60-day rollover deadline. The only recourse to avoiding the penalty would be an actual Private Letter Ruling by the IRS permitting a late rollover, but it would likely cost $12,500 plus attorney's fees to file such a request with no certainty of a favorable outcome.
