Premature Distribution

L1: Premature DistributionMy client’s financial advisor accidentally liquidated an annuity contract and transferred the proceeds into two other taxable investments. My client is 55. Realizing his mistake the financial advisor is unwinding the transaction and is in the process of returning the money to the annuity. My client received a 1099-R reporting taxable incomefor theproceeds in excess of his original investment in the annuity.
Iam writing a letter to the IRS explaining that the 1099-R is incorrect, the distribution was inadvertent, and that the money is beingput back into theannuity.
Will the letter be enough? Anything else I should consider?
2004-04-09 12:22, By: Charles, IP: [65.102.53.126]

L2: Premature DistributionI would have the client request a corrected 1099-R from the insurance company. This will also ensure that they are aware of the issue. Depending on the situation, they may have the advisor make the request.
Jeff2004-04-09 12:32, By: Jeff, IP: [64.31.179.22]

L2: Premature DistributionThere has only been one PLR that I know of where the IRS took the side of the taxpayer and that dealt with a 1035 exchange where all paper work was completed properly, but the surrendering insurance company sent the funds to the annuity owner. A little different that what you are talking about.
I wish you good luck, but I would be real surprised if the insurance company takes the funds back and re-establishes the annuity contract – I have faced many similar circumstances over the last 15 years and we have never re-established a contract. Once the contract was surrendered, and the distribution was made, the amounts became taxable so the 1099R really isn’t incorrect.
2004-04-09 12:35, By: Gfw, IP: [172.16.1.70]