artp Posted June 8, 2011 Report Share Posted June 8, 2011 Elderly clients intended to exchange annuity contracts with Company A to Company B. They mistakenly had Company A send them a check which they cashed ($ 20,000) in March 2009 and then invested in the new annuity with Company B ($20,000 + additional cash =$ 25,000 total) also in March 2009 per discussion with their “financial advisor”. Company A issued 1099-R code 7. Clients said they never received the 1099-R and were unaware that they had a taxable event when the annuity was cashed. Nothing was reported on their 2009 return. IRS issued CP2000 in June 2010 for the taxes on 1099-R. Has anyone been successful in getting the IRS to grant 1035 treatment in a case like this? Advice on how to proceed ? Thanks, Art Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted June 8, 2011 Report Share Posted June 8, 2011 How much of the Company A distribution was taxable? taxbilly Quote Link to comment Share on other sites More sharing options...
artp Posted June 8, 2011 Author Report Share Posted June 8, 2011 How much of the Company A distribution was taxable? taxbilly The amounts I listed were the taxable amounts. Art Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted June 8, 2011 Report Share Posted June 8, 2011 An annuity with no cost ... how odd. taxbilly Quote Link to comment Share on other sites More sharing options...
jainen Posted June 9, 2011 Report Share Posted June 9, 2011 >>they had a taxable event<< That's a pretty bad story. Can't you find any more to it? Can they document incorrect advice from a qualified financial advisor? What instructions did they give the two companies? How sophisticated and knowledgeable are they about investment strategy? Do they have an excellent history of tax compliance? Are there any other records such as a will or a family letter that show how they expected the annuity to be treated? Did they actually "cash" the distribution instead of simply endorsing it to the new company? How much time was between the distribution and the new deposit? Can they show they never needed or wanted the $20,000, rather than changing their minds? In other words, can you document that their economic situation was and is the same as if they had done the intended rollover? They will probably lose unless they have a convincing story, so the bottom line is--are they willing to pay the costs of fighting it, or would they settle for getting penalties abated? Quote Link to comment Share on other sites More sharing options...
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