Custodial Error: Calling a RIRA a TIRA

[Guest reg_h2b]

Simple Intial Error; Correct Solution?...Or Did It Cause More Errors?

Facts:

1. In 1999, Roth IRA (RIRA) owner "direct transfers" his RIRA from Custodian A to Custodian B.

2. "Initial Error": Custodian B *misclassifies* the Roth Account as a traditional IRA (TIRA) and sets up in 1999 the received RIRA as a TIRA.

3. Owner finds custodian B's error in Jan. 2002 and notifies custodian B. Custodian B immediately "fixes" the error on their books by "direct transfering" the assets from custodian B's TIRA to a new RIRA at custodian B.

4. On 4/15/2002 IRA owner makes a real traditional IRA contribution to custodian B who deposits this contribution in the old TIRA which earlier in 2002 had the erroneous Roth amount withdrawn from it.

5. Note, Custodian B did *not* make the correction to the intial problem retroactive. The IRA owner is now seemingly stuck with a false TIRA/RIRA account history that shows a TIRA account "opened" in 1999, a TIRA withdrawal in 2002, a RIRA "opened" in 2002, a deposit in 2002, etc. All non-reporting non taxable events but still a false history.

Questions:

1. Was this the correct way to fix the intial error? Have you seen other custodians handle this error the same way? If not how did they handle it?

2. Any other problems? BTW this was originally a 1998 Roth conversion taxable over 4 years (which were paid correctly).

thanks, interested in any response.

Reg

[Appleby]

The first correction should be done retroactively- since corrected forms 5498 should have been issue for each year the assets were in the TIRA.

Corrected 5498 for the TIRA – correcting the 5498 that was issued

New 5498 for the RIRA for those years.

An alternative would be to change the TIRA to a RIRA and issue corrected 5498- this would have been easier.

The choice is an operational one

[Guest franky]

When Custodian B accepted transfer in 1999, did you sign RIRA documents or TIRA documents?