IRA Trade Error – Can earnings be deposited into IRA

Hello,

If there is a trade error in an IRA that results in lost earnings, can a check be made by the party at fault into the IRA to restore the earnings? How would this be coded / handled from a tax standpoint? Is this common place to do at brokerage firms? Is there a better way to correct the trade error?

Thanks for any thoughts.



If the IRA custodian made the error, they can reimburse the IRA. If some other party was at fault, it may be more difficult. 

If an advisor did not place trades that were agreed upon……so not the custodian. Any thoughts?

The IRA owner would probably need to litigate the damages against the advisor. The concept of restorative payments to IRAs generally is restore losses rather than lost gains. Most restorative payments are usually made from a plaintiff attorney for class action suits, while this is an individual failure to follow instructions.  Placing a value on this is difficult because the loss or gain changes by the day and would factor in the loss or gain from not executing a trade with the loss of gain on what should have been sold, but was not. Therefore, there is no clear answer due to the many variables including whether the custodian would accept a restorative payment and not treat it as a contribution.

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