Roth IRA

[Kurly]

Client had a Roth IRA with bank, Bank was foreclosed by FDIC. Client opened Roth IRA, same amount of dollars to a new bank. New bank classified this as a Roth Conversion. I think it was strictly a transfer of funds not a conversion. Am I thinking right? Client was lucky he was able to get all of his accounts transferred to the new bank. (Savings, Checking, CD's, etc.)(over 1/2 a mil)

Kurly

[erchess]

Not Conversion

I think if the bank is shown proof that the account in question was a Roth before it came to them they will issue a corrected statement. If I'm mistaken then if there is enough money at stake to make it worthwhile your client could sue the bank and/or direct you to prepare the return with correct treatment of the Rollover. If you don't know how to do that (I know I don't) I am sure that someone on this board or your professional organization of choice can help you out.

[Roland Slugg]

Was it a trustee-to-trustee (or bank-to-bank) transfer? Or did the TP take the money out of Failed Bank and put it in New Bank himself? In any case it really doesn't matter what the new bank is calling it, even though it wasn't a conversion. If the TP received a 1099-R from the Failed Bank, look at the distribution code in Box 7, then enter it accordingly in your tax prep software. If all the funds were rolled over in time, it will be a non-taxable event.

Sue the bank? Oh, please!