Research Problem

Early this year, Scott Lowe, age 54, became dissatisfied with the service he was receiving from the broker who managed his traditional IRA. He requested a distribution of the $48,200 balance in the account and received a check for this amount from the broker on May 23. Scott planned to roll the distribution over into a new IRA with a different broker. Before he could do so, he received news that his son-in-law had died in a hunting accident. Scott immediately traveled to his daughters home to console her and his grandchildren. During this period of trauma and confusion, Scott wrote a check for $48,200 to his new broker but failed to instruct the broker to put the money into an IRA. Instead, the broker invested it in a taxable money market account. Scott and his broker did not discover the mistake until late December. Must Scott include the $48,200 withdrawal in his gross income and pay a $4,820 premature withdrawal penalty?

Search Help

Letter Ruling 200417034

IRC Section 408(d)(3)(I)

Rev. Proc. 2003-16, 2003-4 CB 359