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So I had some cash to invest in my Roth IRA and decided to try to take advantage of a bonus being offered by one of the big brokerages for ACAT transferring in cash/securities when the following events occurred (in chronological order):
1. I initiated the ACAT transfer.
2. I found out the destination brokerage didn't offer the mutual fund I wanted to buy and, so, decided it was no longer worth chasing the bonus.
3. I faxed the source brokerage a letter rescinding the ACAT transfer (to which they responded that they could not guarantee cancellation, but agreed to make their "best effort") and I placed an order to buy the mutual fund at the source brokerage (because this fund has a 5 business day settlement, I knew there would be plenty of time to get the cash in the right place one way or another).
4. ACAT deposit clears at the destination brokerage.
5. Days pass and the source brokerage sends me a notice saying if I don't redeposit the cash at least several hours BEFORE the settlement time, they will begin liquidating the other securities in my account.
6. I wire transfer (not ACH) the cash from the "destination" brokerage to my external checking account and redeposit the funds at the "source" brokerage as a 60-day rollover (via check and in person because I wanted to make sure it got coded correctly).
7. Mutual fund purchase settles and everything looks good.
8. Duplicate cash suddenly appears the next day at the "source" brokerage and I use it to purchase long dated treasuries to keep it safe.
9. Negative balance posts to IRA at "destination" brokerage from rescinded ACAT transfer.

I'm not going to say exactly how much the amount is, but it's more than the maximum annual contribution limit for IRAs and, even if it weren't, I'm not eligible to make contributions to IRAs anyway because I don't have any "earned" income. So I can't legally make a deposit to cover the debt, nor can I withdraw it to put it back because there is only one indirect 60-day rollover allowed per 12 month period, nor am I certain it would even be legal for me to request a direct trustee-to-trustee ACAT transfer of the funds BACK to the "destination" brokerage because the assets are NOT inside the IRA with the debt and satisfying debts with assets from outside an IRA is a transaction prohibited by the IRS.

On the other hand, I don't have any assets at the "destination" brokerage that they could liquidate or transfer to cover the debt: neither in any tax advantaged account, nor in any taxable account. So is there anything they can do to me if I just keep the money? After all, it's my understanding that my IRA and myself are not the same legal person, so I'm not really the person that owes them nor is it even my fault because they're the ones that made the mistake, no?

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Curious if you received a 1099-R from the destination broker?

Jahlapenoez (Jan. 30, 2013 @ 5:04p) |

The 'real' 5498 form listing all contributions isn't issued until april/march, since people can make contributions for p... (more)

markkundinger (Jan. 30, 2013 @ 6:25p) |

Yes the 1099-R from the destination broker reports the amount of the indirect 60-day rollover with code J and does not r... (more)

USFinA (Jan. 30, 2013 @ 8:40p) |


Obligatory "Pay your bills deadbeat"

Confused.

camiolo said:   Confused.

---- accidentally sent, from an IRA with a $0 balance, $XXXX cash to my IRA at ----. So now my IRA at ---- has a balance of -$XXXX and it seems that, not only is there nothing they can legally do about it, there might not even be anything I can legally do about it either...so, the question is: F 'em or what?

If I had a large negative cash balance in an IRA I would close the IRA and use the losses as a tax deduction

To OP - so you now are back where you started, except that instead of $50k or whatever out of the original IRA#1 and into the new IRA#2, you now have $100k in the old IRA#1 and -$50k in the new IRA#2? The limit on rollovers doesn't apply to different IRAs or from qualified plans like 401ks (so you could rollover money from a 3rd IRA to cover the debt in the 2nd one). Alternatively, since the rollover you did was reversed, arguably you haven't done a rollover yet from #1->#2, so you could just "another" one to cover the debt without violating the limit of 1/year from a given source to a given destination.

ubermichaelthomas said:   If I had a large negative cash balance in an IRA I would close the IRA and use the losses as a tax deduction
IIRC a similar thing happened to someone around options expiration at interactive brokers and ended up with a big negative IRA. IB came after them and took the funds out of their taxable account to cover it. My takeaway from this is that you can be liable for your IRAs debts (although you may be penalized for making excess contributions in the process), but it's only having the IRA guarantee your debts that results in a prohibited transaction.

ETA: obligatory link to Pub 590 - http://www.irs.gov/publications/p590/ch01.html#en_US_2011_publin...

I'm conflicted because I want to green this topic because it's an interesting conundrum, but red it because you want to be a deadbeat.

The brokerages should be able to work it out. At the very least there could be a "trustee to trustee" transfer from the now too large account back to the negative one.

xerty said:   To OP - so you now are back where you started, except that instead of $50k or whatever out of the original IRA#1 and into the new IRA#2, you now have $100k in the old IRA#1 and -$50k in the new IRA#2? The limit on rollovers doesn't apply to different IRAs or from qualified plans like 401ks (so you could rollover money from a 3rd IRA to cover the debt in the 2nd one). Alternatively, since the rollover you did was reversed, arguably you haven't done a rollover yet from #1->#2, so you could just "another" one to cover the debt without violating the limit of 1/year from a given source to a given destination.

Yes I could jump through some hoops to get a rollover executed, but why should I waste my time fixing their mistakes?

Moreover I'm not completely sure a rollover transfer for the purpose of satisfying the debt wouldn't count as a prohibited transaction...so why shouldn't I, say, tell the broker that if they want me to take action they'll need to pay for a lawyer to counsel me on the consequences or else let me save them some money by letting me just keep it?

Even if the risk is miniscule relative to the cost of lawyering up, why should I bear any tax/legal risk at all for something that I not only didn't cause, but also may not liable?

xerty said:   IIRC a similar thing happened to someone around options expiration at interactive brokers and ended up with a big negative IRA. IB came after them and took the funds out of their taxable account to cover it. My takeaway from this is that you can be liable for your IRAs debts (although you may be penalized for making excess contributions in the process), but it's only having the IRA guarantee your debts that results in a prohibited transaction.

Some key differences between the situation at IB and mine are:
-At IB it was some sort of futures account for which the account holder specifically signed a contract personally guaranteeing the consequences of his trades. I'm not sure if the contract for my plain vanilla IRA is so written.
-At IB the negative balance was a consequence of the account holder's mistake, not a mistake of the broker.
-At IB the account holder had assets in a taxable account which IB could appropriate and I'm not sure if they would have pursued collections (or even been entitled to collect) if the funds weren't already in their custody. IB also has an unprecedented reputation for brutally holding their customers to the letter of their agreements, but that's not the case with my broker.

Also various sources indicate that it doesn't matter whether the IRA is the giver or the recipient of credit guarantees...it's prohibited either way so long as the other party to the transaction is the beneficiary of the account (or also, I think, even the custodian) and the prohibited transaction technically occurs at the moment you sign the indemnity clause which established the IRA, NOT when the debt is actually incurred!
http://www.financial-planning.com/fp_issues/2012_3/irs-brokers-t...
However, realizing the potential this creates to invalidate a huge number of existing IRAs (if not all of them), the IRS issued an announcement providing temporary relief from the tax consequences of this prohibited transaction "provided there has been no execution or other enforcement pursuant to the agreement against the assets of an IRA account of the individual granting the security interest or entering into the cross-collateralization agreement."
http://www.irs.gov/pub/irs-drop/a-11-81.pdf

This is why I'm wondering if I might have no choice but to be a deadbeat, because according to Announcement 2011-81, it may be the case that I ONLY run afoul of the IRS if I execute the agreement by paying the otherwise prohibited debt!

markkundinger said:   I'm conflicted because I want to green this topic because it's an interesting conundrum, but red it because you want to be a deadbeat.

The brokerages should be able to work it out. At the very least there could be a "trustee to trustee" transfer from the now too large account back to the negative one.


I don't want to be a deadbeat, but I just so happen to find myself with a loan whose terms have either not been established or are possibly invalid. And, to be perfectly clear, I'd very much like to pay the broker back and would especially like to agree on a due date that falls sometime after my death or perhaps even structure it as a perpetual bond like the ones issued by the UK government.

There cannot be a trustee-to-trustee transfer unless I:
1. Sell securities in my account since the cash has already been invested for safety.
2. Sign an instruction executing a trustee-to-trustee transfer.
And I'm not sure if it's in my best interests (yes financially, but also more importantly legally) to do either.

OP: Should I steal money?
FWF: No, don't steal money.
OP: But I have this situation, should I steal money?
FWF: no, don't steal money.
OP: It would be hard to give the money back. Should I steal the money?
FWF: no, don't steal money
Op: But..... etc etc etc.

Bank error in your favor. Collect $100.

I'm trying to follow, but am not sure that I can. Let's continue to pretend that we are dealing with $50K.

Let's focus on that original transfer. The New Custodian bought $50,000 of ABC Mutual Fund for you, but before the trade settled, you took the money out of the account leaving nothing. They now say that you owe $50,000 for ABC, but you can't buy it because the account has no money. Communicate with that custodian about what happened. It should be virtually a non issue. They took $50,000 of their own money and bought $50,000 of ABC Mutual Fund. They were expecting $50,000 from you to pay for it. You can't. They can simply turn around and sell ABC Mutual Fund for $50,000 and be in the same place where they started (+ or - a small gain or loss).

The Old Custodian (and the place where you now have money) started an ACAT and then cancelled it. Because they thought that it was cancelled, but it really wasn't cancelled, they put $50,000 back into your account leaving you with an extra $50,000 that does not belong to you. They will most likely quickly figure this out and remove the money (and I'm guessing) any interest that was earned on it. No additional transfers or anything will be needed and you probably have absolutely nothing to gain.

Nice altid

You're a fwf vet

USFinA said:   Yes I could jump through some hoops to get a rollover executed, but why should I waste my time fixing their mistakes?
Because it was your mistake in not checking that your favorite mutual fund was supported at the destination brokerage and your subsequent request to cancel the ACAT that caused the problem, not your sending brokerage and certainly not the destination brokerage.

Moreover I'm not completely sure a rollover transfer for the purpose of satisfying the debt wouldn't count as a prohibited transaction...
If it's your IRA paying your IRAs debt, why would that be prohibited?

xerty said:   IIRC a similar thing happened to someone around options expiration at interactive brokers and ended up with a big negative IRA. IB came after them and took the funds out of their taxable account to cover it. My takeaway from this is that you can be liable for your IRAs debts (although you may be penalized for making excess contributions in the process), but it's only having the IRA guarantee your debts that results in a prohibited transaction.

Some key differences between the situation at IB and mine are:
-At IB it was some sort of futures account for which the account holder specifically signed a contract personally guaranteeing the consequences of his trades. I'm not sure if the contract for my plain vanilla IRA is so written.
-At IB the negative balance was a consequence of the account holder's mistake, not a mistake of the broker.
-At IB the account holder had assets in a taxable account which IB could appropriate and I'm not sure if they would have pursued collections (or even been entitled to collect) if the funds weren't already in their custody. IB also has an unprecedented reputation for brutally holding their customers to the letter of their agreements, but that's not the case with my broker.

It was not a futures account, but I believe there are terms in IB's IRA account agreement that allow them to use your other accounts' assets to satisfy the IRAs debts. Certainly they are able to pursue collections in your situation (perhaps against your sending IRA, which clearly has the funds and they have that account info from the transfer), although whether or not they would do it in your case is unknown and probably depends on the total dollars involved. I agree in the IB situation it was more their fault, although mostly bad luck arising from rare risks they took with their options positions.

Also various sources indicate that it doesn't matter whether the IRA is the giver or the recipient of credit guarantees...it's prohibited either way so long as the other party to the transaction is the beneficiary of the account (or also, I think, even the custodian) and the prohibited transaction technically occurs at the moment you sign the indemnity clause which established the IRA, NOT when the debt is actually incurred!
But assuming you don't have any other accounts at Merrill (the destination IRA), you aren't in the situation of having a cross-collateralization issue here.

This is why I'm wondering if I might have no choice but to be a deadbeat, because according to Announcement 2011-81, it may be the case that I ONLY run afoul of the IRS if I execute the agreement by paying the otherwise prohibited debt!
But it's not you paying your IRA's debts, its your IRA's other account paying its own debts.

xerty said:   
Because it was your mistake in not checking that your favorite mutual fund was supported at the destination brokerage and your subsequent request to cancel the ACAT that caused the problem, not your sending brokerage and certainly not the destination brokerage.


The custodian of the destination brokerage should not have allowed a distribution until the ACAT was cleared...that is an extension of credit from the IRA to the beneficiary which is a prohibited transaction, but perhaps ONLY enforced if the all the steps of the loan are actually executed...for example, if the loan is forgiven instead of being paid off then it might not really be a loan but rather a type of income (similar to an account opening bonus) just as it would be regarded in a taxable account.

xerty said:   
Moreover I'm not completely sure a rollover transfer for the purpose of satisfying the debt wouldn't count as a prohibited transaction...
If it's your IRA paying your IRAs debt, why would that be prohibited?


That in itself wouldn't necessarily be prohibited, but since a prohibited transaction *started* to occur when Merrill extended credit on the uncleared ACAT deposit (or perhaps even earlier...I really need to dig up that agreement instead of debating with you guys over how many angels can dance on the head of a pin ), the payment of the debt might be construed as *completing* the execution of that transaction, thus, triggering enforcement.

The thing is I don't know because I'm not a lawyer and if I have to choose between spending thousands of dollars on one and walking away from debt which might not even be legally mine (as opposed to my IRA's which is unlikely to be sent to collections, IMO) then I'm going to walk away.

xerty said:   
This is why I'm wondering if I might have no choice but to be a deadbeat, because according to Announcement 2011-81, it may be the case that I ONLY run afoul of the IRS if I execute the agreement by paying the otherwise prohibited debt!
But it's not you paying your IRA's debts, its your IRA's other account paying its own debts.


Right, but the credit was extended for a distribution from the IRA to me, the beneficiary. As mentioned above I agree that the payment of the debt would not be prohibited in this case, but that doesn't mean it couldn't trigger the enforcement of another prohibited transaction (namely, the extension of credit to a disqualified person).

Alternatively, the negative balance might be construed as an extension of credit from the custodian to the IRA and, since the custodian is also a disqualified person, that could also be a prohibited transaction that the payment of the debt might trigger, thus again, disqualifying the entire IRA. But I'm not so sure about this one because, even though custodian is a disqualified person in general, there are a number of custodial exceptions.

USFinA said:   The thing is I don't know because I'm not a lawyer and if I have to choose between spending thousands of dollars on one and walking away...
Well, I certainly agree that you aren't going to find a lawyer you knows more than you do about this situation for cheap. Have you tried posting on Ed Slott's board? Maybe you can get him to answer you for free, which is as good as you're going to get on this subject. Alternatively, you can just hire him. Remember you might be paying a few grand for the proof you need to walk away and defend yourself against their collections efforts against you personally (assuming you want to walk), so paying to avoid the credit consequences, etc, could be worth getting a lawyer involved if it's a big enough sum.

xerty said:   
Well, I certainly agree that you aren't going to find a lawyer you knows more than you do about this situation for cheap. Have you tried posting on Ed Slott's board? Maybe you can get him to answer you for free, which is as good as you're going to get on this subject. Alternatively, you can just hire him. Remember you might be paying a few grand for the proof you need to walk away and defend yourself against their collections efforts against you personally (assuming you want to walk), so paying to avoid the credit consequences, etc, could be worth getting a lawyer involved if it's a big enough sum.


Or I could just pocket the interest while I wait to see if big money thinks it's worth getting their lawyers on it.

Since I am absolutely more fearful of the IRS than the broker, and I'm pretty confident I'm still within the IRS's safe zone, I don't think I'm going to do anything until the broker forces me to and I doubt they wouldn't give me ample warning before imposing any serious consequences. I was quite pleased when I used a similar strategy a few years ago to settle some hospital bills (of which, to be clear, I paid every last cent but simply found the "final notice" letters much more organized and manageable after I let THEM sort through the confusion of the originals).

Thanks for your input and I'll be sure to check out Ed Slott's board.

Cheers!

So they bent over backwards to accommodate your nonsense and you're trying to leave them holding the bag? You sir are a douche.

USFinA said:   xerty said:   
Because it was your mistake in not checking that your favorite mutual fund was supported at the destination brokerage and your subsequent request to cancel the ACAT that caused the problem, not your sending brokerage and certainly not the destination brokerage.


The custodian of the destination brokerage should not have allowed a distribution until the ACAT was cleared....
But that's not what happened - you requested they reverse the deposit, then while they were in the process of doing so you withdrew the same funds via a different means. I'm thinking you either planned this from the start, or saw an opening while waiting for the initial deposit to reverse.

soundtechie said:   OP: Should I steal money?
FWF: No, don't steal money.
OP: But I have this situation, should I steal money?
FWF: no, don't steal money.
OP: It would be hard to give the money back. Should I steal the money?
FWF: no, don't steal money
Op: But..... etc etc etc.


<Randy Marsh Voice>

So you're saying he should or shouldn't steal the money? I'm still confused.

</Randy>

Let's run this thread by Germanpope's girlfriend and see if she thinks it's ethical.

I'd try to reverse everything back to the way it started as quickly as possible.

Glitch99 said:   But that's not what happened - you requested they reverse the deposit, then while they were in the process of doing so you withdrew the same funds via a different means. I'm thinking you either planned this from the start, or saw an opening while waiting for the initial deposit to reverse.

Except brokers have always explained to me that ACAT transfers can't be reversed...they can be cancelled within a very small time window, but are irreversible once completed except via a new and separate ACAT transfer. And while this isn't the first time I've changed my mind about an ACAT transfer and requested a cancellation, it is most certainly the first time a broker of mine has ever been able to honor such a cancellation request.

And, as mentioned in the OP, the source broker specifically told me that they would only be able to ATTEMPT the cancellation on a "best efforts" basis and then days later sent me a notice that I needed to deposit funds within 24 hours. Since the destination broker also confirmed that the transferred assets were cleared and settled, under these circumstances don't you think it would be UNREASONABLE to conclude anything OTHER than that the "best efforts" ACAT cancellation request had failed?

How dare you accuse me of orchestrating this on purpose when I am merely the victim caught between an incompetent broker and the iron hand of the IRS!

Now if only OP used BOA as their primary bank account, we'd have the makings for a proper thread...

USFinA said:   
8. Duplicate cash suddenly appears the next day at the "source" brokerage and I use it to purchase long dated treasuries to keep it safe.


This pretty much explains it all.

I'd send a letter and application to Goldman Sachs. They're always looking for folks with your skills.

BrodyInsurance said:   I'm trying to follow, but am not sure that I can. Let's continue to pretend that we are dealing with $50K.

Let's focus on that original transfer. The New Custodian bought $50,000 of ABC Mutual Fund for you, but before the trade settled, you took the money out of the account leaving nothing. They now say that you owe $50,000 for ABC, but you can't buy it because the account has no money. Communicate with that custodian about what happened. It should be virtually a non issue. They took $50,000 of their own money and bought $50,000 of ABC Mutual Fund. They were expecting $50,000 from you to pay for it. You can't. They can simply turn around and sell ABC Mutual Fund for $50,000 and be in the same place where they started (+ or - a small gain or loss).

The Old Custodian (and the place where you now have money) started an ACAT and then cancelled it. Because they thought that it was cancelled, but it really wasn't cancelled, they put $50,000 back into your account leaving you with an extra $50,000 that does not belong to you. They will most likely quickly figure this out and remove the money (and I'm guessing) any interest that was earned on it. No additional transfers or anything will be needed and you probably have absolutely nothing to gain.


USFINA or Xerty, I'd be interest in hearing your comments on my guess.

The "new" custodian is out $50K (for example) since they sent money back to the "old" custodian that was never in the account.

Read your account terms. The broker is not responsible for tax consequences of erroneous trades. If there is a negative balance, any legal costs to the broker to recover that money will be borne by you. Sooo...I'd attempt to fix this. Close the new IRA and send the money back to the new custodian. If you do it fast, hopefully you will not get any tax documents from the new broker, as everything will be undone at that end, plus you will undo your disallowed contribution to the old IRA.

BrodyInsurance said:   BrodyInsurance said:   I'm trying to follow, but am not sure that I can. Let's continue to pretend that we are dealing with $50K.

Let's focus on that original transfer. The New Custodian bought $50,000 of ABC Mutual Fund for you, but before the trade settled, you took the money out of the account leaving nothing. They now say that you owe $50,000 for ABC, but you can't buy it because the account has no money. Communicate with that custodian about what happened. It should be virtually a non issue. They took $50,000 of their own money and bought $50,000 of ABC Mutual Fund. They were expecting $50,000 from you to pay for it. You can't. They can simply turn around and sell ABC Mutual Fund for $50,000 and be in the same place where they started (+ or - a small gain or loss).

The Old Custodian (and the place where you now have money) started an ACAT and then cancelled it. Because they thought that it was cancelled, but it really wasn't cancelled, they put $50,000 back into your account leaving you with an extra $50,000 that does not belong to you. They will most likely quickly figure this out and remove the money (and I'm guessing) any interest that was earned on it. No additional transfers or anything will be needed and you probably have absolutely nothing to gain.


USFINA or Xerty, I'd be interest in hearing your comments on my guess.

I think you mis-read OP's somewhat confusing account of what happened. The mutual fund purchase with the settlement issue was in the source IRA, not the destination one. OP bought this expecting the ACAT to be reversed, but when that didn't happen fast enough for settlement, he withdrew the cash that had arrived at the destination and did an indirect rollover to return the funds to the source IRA in time for the settlement of his fund purchase.

Ok I finally found my custodial agreement and the first paragraph under "indemnification" says:
You agree to repay us for any liabilities or expenses
we may incur as a result of this agreement, other
than those arising out of our failure to perform our
specified duties.




delzy said:   I'd send a letter and application to Goldman Sachs. They're always looking for folks with your skills.

LOL...buying treasury bonds with money that shouldn't really be yours does sound awfully familiar doesn't it?

But why join 'em if you can beat 'em?

BrodyInsurance said:   
USFINA or Xerty, I'd be interest in hearing your comments on my guess.


Thanks for your input; It is much appreciated, but please see explanation from xerty.

Deleted

stanolshefski said:   
Why do I feel like your next thread is going to be from a new alt id:

Help! Assistant U.S. Attorney Wants To Charge Me With ...


You mean like the charges they brought against the custodian of my IRA a few days ago? Or do you mean like the charges the custodian of my IRA settled last year? Or the year before that?

All I can say is if the big financial institutions can't take the heat, then they should stay out of the kitchen because I'm just giving them a dose of their own medicine and there's nothing illegal or unethical about it...although I admit that I probably would not be able to bear an onslaught of inane whining from their overcompensated smarty pants lawyers if they could manage to find a judge to entertain it.

Deleted


scrooge (35.82kB)
Disclaimer
stanolshefski said:   
But your honor, I can't be guilty of wire fraud or theft by deception because the victim has a bad reputation.

Yeah, that's one hell of a legal defense.


First off, in the USFinA, our fates are not determined by judges, but by juries with whom reputations do weigh heavily because they're generally smart enough to know that the testimony of known criminals is, in fact, not that trustworthy. So yes it would be one hell of a defense.

Second off, the legal reason I can't be guilty of wire fraud or theft by deception is because, the fact is, no one has been deceived. The broker simply F'ed up, both in how they wrote their contracts, and in the fulfillment of their duties for which I would be happy to inform them in the most transparent and undeceptive way possible that they can kiss my assets.

So does that mean I want them to bring charges against me? No, but if they do then I will simply have to pay the cost of fighting it just like every other good citizen that's ever been falsely accused because I have not and am not doing anything illegal.

Don't you hate threads where you can't decide if the OP is really stupid or very clever?

OP,

I don't know if you are ok legally. You might actually get away with it. But morally, this is wrong.
Also, you will get banned from any new institution. I am guessing brokers have their own version of
credit reports, ChexSystem, etc. If they do, they will put this incident in the report, and you might
regret this in the future. I would return the money. I guess you just want to know if you can get away
with it. Contact a lawyer to make sure, or it can end costing you more money and hassle at the end.

USFinA said:   Except brokers have always explained to me that ACAT transfers can't be reversed...they can be cancelled within a very small time window, but are irreversible once completed except via a new and separate ACAT transfer. And while this isn't the first time I've changed my mind about an ACAT transfer and requested a cancellation, it is most certainly the first time a broker of mine has ever been able to honor such a cancellation request.WTF? I agree with raringvt, you are total douche for wasting everyone's time. I hope you get blacklisted.

Don't be too harsh with the OP, I want him or her to come back and give us updates whichever way this ends up going....

He won't have computer access in Kansas and he will be too busy making furniture for the Pentagon. So I doubt we will get many updates.
Professional advice: If you clear this up BEFORE DOJ finds out the Federal Sentencing guidelines give you an out. The no harm no foul rule. Wait around and you will head to El Reno OK which is the Lackland AFB for FPI.

Isn't lackland on military road in san Antonio ? I almost got arrested after My friend was doing 110 down that street

Skipping 31 Messages...
markkundinger said:   The 'real' 5498 form listing all contributions isn't issued until april/march, since people can make contributions for prior year up until tax time. The one you got now (I'm actually surprised you got one), would just be to list the year end fair market value.

I'm also curious to see what kind of 1099-r you get from the 'destination' brokerage, and how they code the 'rollover'.

And I forgot, in all this mess, did the check go back into your Roth IRA in the source brokerage, i.e. your IRA balance doubled?


Yes the source account has doubled in value and has had that year end fair market value reported on the 5498 along with the amount of the 60-day "rollover contribution" which was deposited via check. That being said, after looking more carefully at what I have it turns out you are right that I haven't yet received the official 5498 from the destination brokerage. What I have received is:
1. An official 5498 for the source account.
2. An official 1099-R for the destination account.
3. A year-end statement for the destination account which contains a page with all the information that would be on the 5498 ($0 in contributions for 2012 and $0 for the 2012 year end fair market value) and a footnote that "the Year-End Plan Value represents the valuation we must furnish to you and the Internal Revenue Service as part of the IRS Form 5498 reporting requirements"...but I was mistaken in that this page does not claim to be the official 5498 itself.

However, even just these two official forms is all that is needed to demonstrate that the IRS has received official notice of all relevant information to date because:
A. The indirect (60-day) rollover is reported as expected with code J on the 1099-R of the destination account and as a "rollover contribution" on the 5498 of the source account.
B. The direct trustee-to-trustee transfer is, also as expected, not reported at all because trustee-to-trustee transfers are exempt from reporting by Internal Revenue Code section 408 (d)(2)(A) - "all individual retirement plans shall be treated as 1 contract,"
C. The year end fair market value is reported as doubled on the 5498 of the source account.
...so the official 5498 for the destination account isn't particularly relevant because a prohibited transaction (and a disqualified IRA) would be reported as a distribution on 1099-R, not as a contribution on form 5498, and although it is true that the year end balance of $0 has yet to be officially reported to the IRS, it would be a boldfaced lie for the official 5498 of the destination account to report anything other than $0 because that was, in fact, the balance listed on the statement for 12/31/2012 regardless of what corrections or transactions might have occurred before or after that date.

Jahlapenoez said:   Curious if you received a 1099-R from the destination broker?

Yes the 1099-R from the destination broker reports the amount of the indirect 60-day rollover with code J and does not report the amount of the duplicate rescinded/reversed trustee-to-trustee transfer at all. Also, the 5498 from the source brokerage corroborates this information with the same amount listed under box 2, "rollover contributions".



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