Mistaken IRA Distribtion in NOV 2010
Need some help!
A friend of the family called me with this dilemma:
His father has Alzheimers –been going downhill for past 2 years.
Last fall, the eldest son was helping Mom and Dad re-balance some assets with the help of an outside Elder Care advisor (not a CFP). The elder care advisor–in massachusetts where the client lives–was a referral from a local law firm.
Somehow, the client and his son were told or allowed to roll out of a Lincoln IRA (VA) with about 650k in total assets. How this was allowed or discussed I will never know. this happened last fall (NOV 2010).
Now the family faces a 150K tax bill…and my question is (drumroll please…) Is there any relief from IRS if they were given wrong information from this elder care advisor? Can they roll back the distribution? Any thoughts here??
Tom Hine
860-659-8200
Permalink Submitted by Tom Hine on Wed, 2011-03-09 18:52
PS…More data:
The father is over age 60. I don’t have DOB yet. I am not sure if RMD’s have been taken.
Permalink Submitted by Alan Spross on Wed, 2011-03-09 20:02
There is a good chance the IRS would grant extension of the 60 day rollover period. A letter ruling request costs $3,000 plus legal fees to request the extension. The medical diagnosis provides adequate reason and the other factor may be what the funds were used for after distribution.
The RMD amount must also be identified if there is one. If he reached 70.5 in 2010 or earlier, the first distribution is deemed to apply to the RMD, and therefore the rollover request should only ask relief for the amount to be rolled over in excess of the RMD, if any.
Permalink Submitted by Bruce Steiner on Wed, 2011-03-09 20:49
Expanding on Alan’s response, for distributions beginning in 2002, the IRS has discretion to waive the 60-day deadline under Section 402(c)(3)(B) “where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual”.
We’ve obtained waivers of the 60-day deadline in about a half dozen such cases.
A medical reason is usually a good one, though each case turns on its own facts.
Bruce Steiner