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Investment mistaken as a distribution by custodian.


Flight33
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Individual intended to invest money held in an IRA into a private fund.

Custodian sent check to private fund.

Individual always intended for IRA to hold the investment.

Custodian mistakenly believed the check was intended to be a distribution from the IRA (and that the individual, personally, would be the investor in the fund, and not the IRA).

Individual would like simply unwind the transaction and put the money back into the IRA (fund is willing to return the money).

Is returning the money into the IRA allowed? Assume it can be shown that custodian was at fault for not following individual's directions.

Thank you in advance.

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Who is the IRA trustee who was supposed to be holding the private investment?

Can the individual do a 60 day rollover?

Does the participant have paperwork showing the receiving custodian would hold funds in the IRA's name?

How has the private investment titled the funds?

Why is it assumed that the custodian is at fault? They may be but why is that the assumption here?

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If the distribution was within 60 days it can be rolled over back to the IRA. The IRS can give relief to certain botched rollovers via private letter ruling. The guitly custodian should be consulted to see what the custodian thinks can be done -- the custodian has the reporting duty and relevant records.

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Why is it assumed that the custodian is at fault?

Sounds like the individual and/or broker messed up. Direct rollovers are usually initiated by the receiving IRA, which leaves no doubt about the nature of the transaction. If the receiving account is not an IRA, well...it's not an IRA. I don't know how the distributing custodian could be at fault.

Ed Snyder

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Not all IRA custodians will handle / permit self-directed investments. If the custodian in question does deal with self-directed investments, then they are likely the best source of information as to correcting it. Especially if it can be shown they botched the transaction paperwork.

But if the custodian does not deal with self-directed investments, then the individual had no valid reason to expect the transaction to be done in the way described and is likely out of luck.

As for a PLR... From what I found searching the internet for " ira plr cost ", it could cost high 4 figures to file a PLR. Have to weigh that against any potential early distribution penalty.

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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