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expiration of the 60-day period, the trustee corrected its
records to reflect that all of the distribution had been
transferred to the taxpayer’s IRA rollover account. The parties
stipulated that the taxpayer’s IRA rollover account was
established and satisfied the requirements of the Internal
Revenue Code. The taxpayer did not become aware of the error
until after the Commissioner questioned his failure to report the
lump-sum distribution on his tax return. We held that the
financial institution’s bookkeeping error did not preclude
rollover treatment because, in substance, the taxpayer had
satisfied the statutory requirements.
In Schoof v. Commissioner, supra at 11, we held that the
failure of a fundamental element of the statutory requirements
for an IRA rollover contribution, namely, the qualification of an
IRA trustee, required distributions from an IRA to be includable
in the taxpayers’ gross income. We relied on the following
passage to support our holding:
“Where the requirements of a statute relate to the
substance or essence of the statute, they must be
rigidly observed. On the other hand, if the
requirements are procedural or directory in that they
do not go to the essence of the thing to be done, but
rather are given with a view to the orderly conduct of
business, they may be fulfilled by substantial
compliance.” [Schoof v. Commissioner, supra at 11
(quoting Rodoni v. Commissioner, 105 T.C. 29, 38-39
(1955)); citations omitted.]
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