An IRA Owner Pays Dearly for Inaccurate Advice Regarding His Account

The owner of an IRA wanted to invest part of it in a limited partnership in which he already owned an interest, but the IRA custodian wouldn’t go along. So, acting upon the advice of his financial adviser and CPA, he had the IRA custodian distribute money to him. He took the funds and purchased a partnership interest with the IRA named as the owner. But the advice he got turned out to be incorrect. The transaction didn’t qualify as a rollover because the limited partnership interest wasn’t held by a qualified custodian. He asked IRS to waive the 60-day rollover rule, but IRS wouldn’t grant him relief. As a result, the original withdrawal is fully taxable. But incorrect advice gets another IRA owner off the hook. He intended to roll over an IRA distribution into a second IRA but was told by a bank employee to put it into a checking account instead. The error was noticed after the 60-day period for rollovers had expired. Since he had planned a rollover, IRS gave him extra time.

From: The Kiplinger Tax Letter, August 15, 2014


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