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Background
This case was submitted fully stipulated under Rule 122, and
the applicable facts may be summarized as follows.4 During 1998
petitioner maintained a self-directed IRA. Pershing, a division
of Donaldson, Lufkin & Jenrette Securities Corp., was the
custodian of the IRA, and Hibernia Investments, L.L.C.
(Hibernia), was the investment adviser.
Petitioner could request that the funds of the IRA be
invested in specific assets (specific mutual funds, stocks,
etc.). These requests were typically made by telephone to
Hibernia, and Pershing, as custodian, would then execute the
requests. In September 1998, petitioner requested that his IRA
invest $40,000 in the stock of S.K. An employee of Hibernia
informed petitioner that although S.K. stock could be held as an
asset of the IRA, Pershing would not purchase the stock on behalf
of the IRA because the stock was not publicly traded.
Subsequently, petitioner contacted S.K. directly and was informed
that its stock was available for purchase directly from S.K.
Petitioner and Hibernia determined that the IRA could invest in
S.K. if Pershing issued a check payable directly to S.K.
Hibernia furnished petitioner with a “Distribution Request Form”
from Pershing to facilitate the issuance of the check. The form
4 The facts are not in dispute and the issue is primarily
one of law. Sec. 7491, concerning burden of proof, has no
bearing on this case.
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Last modified: May 25, 2011