"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote:
- quote -

We are bound by values, but the point is that much of the
value reported on the 5498 was not really there.

I am so far advising the client to base his 2004 required
distribution on whatever information he can find, even it is
a very loosely based estimate by the current trustee of the
remaining assets.

Colin

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Colin Whipple wrote:

- quote -

It WOULD be nice if one could take into account present day
values when computing a RMD on any day of the year, but
alas, we are bound by 12/31 values of the year past.

Only in one case I personally know was the RMD less than it
should have been based on 12/31 value, and in my client's
case, ALL of it had been lost; and I do mean all of it. (No
additional IRA accounts of course)

Now, I'm wondering if the case you're involved with might
have involved cash machines (atm variety) to be placed in
fast food outlets whereby a customer could tap his debit
card for cash to buy hamburgers or such? That particular
oompany was in California.

ChEAr$,
Harlan Lunsford, EA n LA

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"Colin Whipple" <colinwhippleNSPM[at]adelphia.net> wrote:

- quote -

If you've found nothing in your research, and you seem
fairly confident there is no guidance (and I admit I don't
know) then can the client go for a letter ruling? If
nothing else, I think you could probably get a waiver on the
penalty following the exception for reasonable cause and
attaching an explanation to Form 5329.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Colin Whipple wrote:

- quote -

I don't think there are any direct rulings on point--rather
the issue is what is the definition of "account balance" as
referred to in Regulations 1.408-8 and 1.409(a)(9)-5 (the
starting point for computing the required minimum
distribution).

Notice 87-44 defines what must be reported on a Form 5498.
That requires that the amount reported be the fair market
value.

Now the fun starts--if the reporting entity was "in" on the
fraud and, in fact, was reporting assets that didn't exist,
I think a good argument can be made that the actual FMV was
significantly lower than what was on the 5498. The problem
will be proving the amount, but I suspect it will be
possible to determine the *maximum* it could have been
worth.

A problem might occur if, in fact, there was a ready market
at that date where the taxpayer *could* have sold the
securities for the amount reported on the 5498. Best
example--if you held Enron stock before the problems became
clear. That stock had a fair market value of its market
price at the preceding December 31, even if that price
arguably might have existed mainly because the market was
misinformed about the actual situation inside the company.

--
Ed Zollars, CPA
Phoenix, Arizona

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"Colin Whipple" <colinwhippleNSPM[at]adelphia.net> wrote:

- quote -

If you're saying that the 5498 is inaccurate, and you can
document that, then the 2004 distribution is based upon the
correct 12/31/03 balance. If the 5498 is accurate, but the
account value has disappeared subsequent to that date, then
you must withdraw the minimum distribution computed on that
amount, or the entire balance, whichever is less.

Barry

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The taxpayer has part of his IRA funds with an investment company that he
finds out is running a Ponzi scheme. Much of the values that had been
reported on his Form 5498 as of 12/31/2003 were not there.

He has very little idea and is unlikely to learn by the end of 2004 what he
will be able to recover.

How should he compute his required distribution due before the end of the
year? Are there any rulings, cases, etc. which speak to this issue?

I looked through IRS Pub. 590 amd BNA Portfolio 370-3rd without finding
anything on point.

Colin Whipple, CPA
Brea, California

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