Excess Distribution due to PPA Change in 415 Interest Rate

[Guest sueczer]

We had a client who received a payout i 2006 prior to the enactment of PPA. We reported the excess distribution on a 2006 1099R as a 303 excess amount using code E in Box 7, taxable income not subject to 10% penalty. The client is withdrawing the excess distribution from his IRA prior to March 15, 2007. He is being told by the investment company that a 1099R will be issued for 2007 as this will be considered as taxable income in 2007, with the caveat to contact their financial advisors. Two accountants did not know which method is correct. Would anyone care to confirm that we handled this distribution correctly and advise that the excess withdrawal is indeed a 2006 taxable event and not 2007.