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2002-178. The $25,000 in question here was not rolled over into
an IRA or other qualified plan. Instead, that portion of the
distribution was placed into a regular investment account and is
thus not exempt from the additional early withdrawal tax or
inclusion in petitioner’s 2002 gross income.
Although Vestin Mortgage does offer qualified IRAs, in order
to make a rollover contribution, the person opening such an
account would have to utilize the services of a custodian to make
a valid transfer of funds. Petitioner did not employ the use of
a custodian when opening his account.
In addition, the documents petitioner filled out to open his
account with Vestin Mortgage indicated that he was interested in
a “transfer-on-death” account, an individual account. According
to Vestin Mortgage’s representative, a beneficiary designation
for an IRA would have been filled out with a completely different
form, thus providing circumstantial evidence of petitioner’s
intent.
Petitioner argues that his intent was to open an IRA and not
an individual account, and he should not be penalized for the
mistake. It is not unheard of that mistakes, such as clerical or
bookkeeping errors, made on the opening of a new account have
later come to light, rendering the rollover defective in some
way. In some rare instances, courts have been willing to
recharacterize an imperfect transaction as a rollover
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Last modified: November 10, 2007