I need to take an old 401k from a previous employer over to an IRA in order to to keep it drawing interest and to make withdrawals as needed.
I had taken a 401k loan before leaving the firm and intentionally let the loan default, knowing that I would need to pay tax on the distribution on the very next Income Tax period - which I did. I have a 1099-R that shows the distribution (box 1, Gross Distribution, and box 2a, Taxable Amount both show the same amount), and I have a 1040 (from 2008) which shows that same distribution amount in line 16b, Pensions and Annuities, meaning I paid the tax on that distribution.
The 401k still shows this distribution as a "Loan Investment" along with the investment of the other 401K investments (see attached). Of course there is no money in the "Loan Investment" - the units and price are 0.0 (as opposed to $x,xxx for this and $xx,xxx, etc for other investments).
Do I now need to pay tax on that a SECOND time when the 401K is taken over to the IRA (as the advisor stated)?
Should that defaulted loan even still appear in the old 401k? Is there any way by looking at the chart that the advisor should realize that this loan was defaulted and tax has already been paid on it? I hope to show him my 1099-R and my 1040 tax form to prove the payment was actually made, but that may not fly.
Thanks for any advice anyone has on this matter.
