Tax Free Annuity Question

[FEDUKE404]

Concur on that one!

I think your client's broker is a grossly misinformed malcreant who has screwed your client royally. But, the broker won't bear the brunt of this come the filing deadline, your client will.

I tend to agree that the vast majority of any current/pending tax problems are the result of improper actions, regardless of "justification," by the investment firm/broker.

It might be a very wise move for your client to obtain legal representation for what lies ahead. Things could get quite nasty.

It is more than likely there is a lot of taxable income pending, and (from the facts presented) no way placing "new" funds into any Roth IRA account would be allowable. You might also want to ask the client and his wife what their personal understanding of "rollover" was.

FE

[Roberts]

A qualified tax SHELTERED annuity can be rolled into a self directed Roth IRA.
Anything else is a no-go.

These were rather common and just because it transfered between trustees, it may have originally been a qualified plan. Don't discount the possibility just because you client says so.

[Burke]

Roland, that's what I thought. The tax-free annuity was never in a retirement plan, although these things were marketed, sold, and bought for retirement.

I can tell the client this. Problem is, his broker has already rolled the thing over into a Roth.

We'll see what the 1099 says. Not even sure this will be a 1099-R. Might be a 1099-B.

It will be a 1099-R for the taxable portion (the earnings.) Taxed at ordinary income rates. And that may be substantial if he has had since the 1970's. His basis (original purchase price) was with after-tax funds if your details are correct. The former insurance company can verify this.