- 10 -
We distinguished Wood v. Commissioner, supra, on the ground that
it involved procedural defects in the execution of a rollover.
Schoof v. Commissioner, 110 T.C. at 11.
The evidence in the record indicates that Ms. Koble and the
bank felt that they had mistakenly characterized the transactions
and that they were attempting to correct their mistake. This was
not the only mistake or defect in the rollover or transfer, nor
was this defect corrected in a timely manner. The parties
stipulated that, as of March 12, 2002, the funds withdrawn from
the IRA on August 28, 1998, remained in the AEL nonqualified
annuity. A fundamental requirement for a rollover contribution
under section 408(d)(3) or a trustee-to-trustee transfer under
Rev. Rul. 78-406, supra, is that funds actually be rolled over or
transferred into an IRA or other qualified plan. We believe that
failure of this fundamental requirement extends beyond the
procedural error in Wood v. Commissioner, supra, which was cured
by substantial compliance and the fulfilment of the remaining
requirements of the statue. Thus, like the situation in Schoof
v. Commissioner, supra, we find that the failure to roll over or
transfer the funds to an IRA or other qualified plan is fatal to
petitioner’s case.8 Accordingly, we hold that the $39,295.08 is
includable in petitioner’s 1998 gross income.
8Again, we note that the parties stipulated that at the time
this case was submitted the funds remained in the nonqualified
annuity.
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