On May 5, 11:36*am, "Fred" <frtane...[at]gmail.com> wrote:
- quote -

I believe the answer is "yes" -- or at least a "definite maybe".
But what actually transpired is not as the bank describes it.
Here is what I believe really happened.

1. You purchased a CD with personal funds.
2. You rolled over the $50K distribution into a qualified IRA.
3. The IRA acquired the CD by an exchange of funds for the CD.

Some open questions (in my mind) are: (a) whether or not the
exchange in step #3 is a taxable event, subject to penalty for
"early withdrawal" of the CD; and (b) whether or not the CD
interest income for interim period between steps #1 and #2
should be paid to your personal SSN (i.e. it is taxable).

I am not qualified to comment. I can tell you that we did
something very similar for my mother under the auspices of a
CPA, with no tax consequences. Some bonds were held in a
qualified pension plan to which my mother is the "survivor
beneficial owner". (Not sure that's the right term.) The title of
the bonds was transferred to my mother (i.e. her SSN, not the
plan's EIN) in exchange for funds from her saving account,
which were transferred into the pension plan.

Arguably, you are going in the reverse direction, so the issues
of sheltering the interest and the potential "early withdrawal" of
the CD may be different.

I suggest that you contact a CPA that specializes in personal
tax matters. If in the final analysis, the bank misled you, you
might want to contact an attorney about seeking compensation
from the bank.

--
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"Fred" <frtanel35[at]gmail.com> wrote in message
news:_8HTj.15729$2g1.6701[at]nlpi068.nbdc.sbc.com...
- quote -

Please don't ask the same question in multiple groups.

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Fred wrote:
- quote -

There is no discussion in Pub 590 that would allow this treatment, since
despite his intent he did not follow the rules. So, with no further
action, he has both an early distribution and an excess contribution.

If this is the current year, since it is only May 5th, there is time to
undo both actions for tax purposes (although the bank may levy a penalty
on closing the CD early).

Otherwise, you could provide an explanation with the return when filed
and hope for the best. It would be nice to know whether the bank will
issue a 1099-R for the "annuity IRA" with code 1 or code G.

-Mark Bole

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"Harlan Lunsford" wrote:

- quote -

I reached the same conclusion after going to the Code and regulations, which
discuss rollovers in the context of the distribution, not the contribution.
If you don't have the distribution in hand I don't see any possible way to
roll it over.

The only solution to OP's situation I can think of is to do a real rollover
contribution within 60 days of the distribution and "undo" the original one
as an excess contribution. To leave things as they are would result in a
taxable distribution plus an excess contribution.

For OP's sake I'll be quite happy if someone can prove us wrong.

I don't recall whose idea the original sequencing was, but if it originated
with the bank I'd be making a strong (and loud in the lobby at high noon if
necessary) argument that the bank waive the penalty for early termination of
the CD.

--
Phil Marti
Clarksburg, MD

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Fred wrote:
- quote -


Reading the book, i.e. publication 590, it speaks of a rollover (only)
after receiving the funds, but before the 60 day window as we all know.
And as many years as we've had IRA's with rollovers, I've never heard of
such a case like this. From a financial standpoint it makes sense to
lock in the rate. But I'm afraid to IRS opening an IRA with funds
other than derived from the other one would be a prohibited transaction,
least as far as taxpayer didn't qualify on his own merits during the tax
year.

The only definite way to determine this I'm afraid is to request a
letter ruling, which costs money.

Of course I'm looking forward to other opinions on this subject.
ChEar$,
Harlan Lunsford, EA n LA

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54 year old taxpayer has $50K in an IRA Annuity account. The Annuity is
with an insurance company, but his bank has handled all administrative
aspects for him. Taxpayer decides to pull the money out and roll it over
into an IRA CD. On May 1st, taxpayer fills out and submits a form to the
bank requesting liquidation of the annuity funds. Bank tells him it will
take approximately two weeks for the funds to be disbursed. Bank also
informs him of an IRA CD offering with a very favorable rate, but they tell
him the rate will expire on May 5th - before the funds from the Annuity IRA
are expected to be received. So on the request for funds disbursement from
the annuity, bank suggests he request the funds be sent directly to him,
knowing that the IRS will allow him to have the funds for 60 days before he
has to roll them over. He then withdraws $50K from his savings account and
uses it to open the 50K IRA CD since he doesn't want to lose the good rate.
Bank codes the CD as an IRA CD with externally provided funds. He opens the
IRA CD on May 2nd, one day after he requested liquidation of the Annuity
IRA, but before he has actually received the funds. When funds from the
annuity disbursal are eventually received on May 15th, taxpayer take the
proceeds and put them back into his savings account.

If he does the above steps in the exact sequence noted, can he legitimately
report the transaction on his 1040 as an IRA rollover (and thus, not subject
to any penalties)?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >