Need help on K-1 rollover

[arlo]

Client had a IRA in a Partnership. The IRA was rolled over to traditional mutual funds.
The partnership issued a K-1 showing the distribution. The K-1 showed income along with the distribution. On a normal rollover you get a 1099 with the rollover code and report it on the 1040. Does anyone know how to report a rollover from a K-1?

[BOB W]

Client had a IRA in a Partnership. The IRA was rolled over to traditional mutual funds.
The partnership issued a K-1 showing the distribution. The K-1 showed income along with the distribution. On a normal rollover you get a 1099 with the rollover code and report it on the 1040. Does anyone know how to report a rollover from a K-1?

Traditional Mutual Fund...Do you mean a Traditional IRA Mutual Fund?

[arlo]

K-1 rollover

Yes, it was an IRA rolled over to another IRA.

[Koss]

Hmmm...

Arlo wrote:

Client had a IRA in a Partnership.

I think you mean that your client had a partnership interest inside an IRA, i.e., the money in his IRA was used to invest in a partnership.

So the partnership was the investment. As an analogy, suppose your client had invested the money in his IRA by buying 100 shares of Honeywell stock, instead of buying an ownership interest in a partnership.

My question is: Who is/was the trustee, or custodian, of the IRA? It is usually a financial institution.

If your client had bought shares of Honeywell stock, they would have been purchased through a broker, like Fidelity or Scottrade. Instead, your client purchased an interest in a partnership. But there still had to be some other entity serving as the trustee of the IRA.

The trustee should be issuing Form 1099-R. The identity of the trustee may or may not have changed. The trustee is the one who, based on instructions from the taxpayer, directed the partnership to liquidate the interest. That trustee then did one of two things: Either they maintained their role as trustee, and simply moved the money into a mutual fund, or they transferred the money to a new trustee.

If they maintained their role as trustee, then there may not be a reportable rollover.

If your client had bought Honeywell stock, and then sold it, and used the money to buy IBM stock, would that be a rollover? No. Not unless he switched brokers. If the sale of one investment and the purchase of the new investment occur in the same IRA account maintained by the same trustee, then there is no rollover.

Ask your client: Who got you into the partnership investment?

And then look at the documents reflecting the mutual fund investment.

I'll bet it's the same investment advisor.

BMK

[BOB W]

Yes, it was an IRA rolled over to another IRA.

The partnership probably received the 1099R. Get a copy of it. I would enter in as if it was your client on the 1040 as a rollover and ignor the K-1 distribution for the same amount. Yes, you will have to explain this issue down the road but at least the 1040 will be correct. Keep all proof of rollover info.

[erchess]

Definition of Rollover

So your client had an IRA that was invested in a Partnership. Then he sold the partnership or it dissolved or something but whatever his ownership interest turned into cash and he invested the cash in traditional mutual funds. Is that what happened?

A Rollover is different from and for tax purposes unrelated to a change in the assets owned. A rollover occurs when a plan has one trustee (possibly an employer's plan or a brokerage or a bank) and the assets are moved to another trustee. Some trustees have language to the effect that when they roll over they send only cash so that they can sell all assets and charge fees for that service. But in any event the act of rolling over and the act of changing assets within the account are for tax purposes unrelated. If your client had a real rollover there should be a 1099R somewhere.

I don't know why taxable income got reported. I think my first thought for an answer to that would be to ask whomever prepared the K-1.

Once again I am slow. When I started my answer there were no others.

[Koss]

Income on Sch. K-1

erchess wrote:

I don't know why taxable income got reported. I think my first thought for an answer to that would be to ask whomever prepared the K-1.

I was thinking about that myself. Erchess and I are saying the same thing. Selling one investment and buying another, within the IRA itself, is not a rollover.

So the Sch. K-1 reflects taxable income. To whom? Not the taxpayer. Look closely at that K-1. I'll bet it doesn't have the taxpayer's SSN on it anywhere.

The K-1 was issued to the IRA. The K-1 does not reflect a distribution from the IRA to the taxpayer. It reflects a distribution from the partnership to the IRA.

The recipient of the K-1 is the trustee.

BMK

[arlo]

K-1 rollover

The clients IRA was cashed out from a Colorado broker to an Illinois broker.
Koss is correct, there is no SS # on the K-1 at all. There is a partnership employer Identification number for the partnership and a partner's identification number.which is my client. There is no tie to his SS#. I am going to see if I can get the 1099, if not, I am going to go ahead and report it as such. Thanks a bunch for the help

[BOB W]

The clients IRA was cashed out from a Colorado broker to an Illinois broker.
Koss is correct, there is no SS # on the K-1 at all. There is a partnership employer Identification number for the partnership and a partner's identification number.which is my client. There is no tie to his SS#. I am going to see if I can get the 1099, if not, I am going to go ahead and report it as such. Thanks a bunch for the help

Just ignore the K-1, it is not related to his 1040..............