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Return.4 In August 2000, respondent contacted petitioner
regarding the withdrawal from the IRA and transfer of funds to
the nonqualified annuity. In response to respondent’s inquiry,
petitioner began to investigate the tax implications of the 1998
withdrawal and closing of the IRA.
Petitioner contacted the bank to discuss the withdrawal from
the IRA and transfer of funds to the nonqualified annuity. The
bank and Ms. Koble subsequently took steps to recharacterize the
August 28, 1998, transactions. On February 1, 2001, Ms. Koble
prepared and signed a “Traditional IRA Withdrawal Statement”.
The document directs “the Trustee or Custodian to make a
distribution from the IRA” as a transfer to the new trustee, “AEL
Annuity”. The document states that the IRA, account number
0400014416, was “closed out as reg CD / should have been done as
trustee transfer”. Just below this statement are the words “Bank
Error”. The document is backdated to August 28, 1998, the date
the funds from the IRA were withdrawn and transferred to the
nonqualified annuity.
In 2001, the bank prepared a corrected 1998 Form 1099-R.
The corrected Form 1099-R reported a gross distribution of $0 and
a taxable amount of $0. On a “Retirement Account Correction
Worksheet”, the bank explained that it issued the corrected Form
4Petitioner’s 1998 Form 1040, U.S. Individual Income Tax
Return, listed his occupation as truck driver.
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