Fraudulent IRA withdrawal – tax reporting

An elderly relative recently learned that a “friend” of the family fraudulently accessed her IRA account at a large mutual fund company in 2007 and stole a large portion of her account. She is in the process of filing affidavits with the company certifying that she did not authorize or receive the withdrawals, and has also filed a police report. The company has reported the fraudulent distributions to the IRS on a 1099R as taxable distributions (which I would expect given they are only in the early stages of investigating the fraud claim). I’m hoping she can avoid having to report these stolen funds as taxable income on her 2007 tax return. Do you have any advice on how these should be handled on her return?