PRIVATE LETTER RULING 201013067:
A taxpayer we will call Doug had a 'golden opportunity' to invest in a
limited parternship...but he had to act fast!
As the admission deadline approached, Doug learned that his financial
institution would be unable to distribute the funds from two IRAs by the
The investment company advised Doug that the investment could be
made with non-IRA funds and later, when the IRA funds were available,
could be 'restructured' as an IRA. (This is completely false. There can
be NO self dealing between an IRA owner and an IRA.)
Doug eventually received IRA funds and put them in a separate account
in a different institution. The funds were NOT commingled with other
funds and the funds were NOT used for any other purpose.
The investment company told Doug the account MUST be maintained as
an IRA and that it would send the appropriate documents. On the 60th
day after the withdrawal from the IRA, the fund company told Doug the
IRA could NOT be established for another 10 days.
Doug is granted an extension to roll the IRA funds into an IRA. In this
case, he is very, very fortunate the investment company erred. If he had
done what they advised him to do and restructured the investment as an
IRA, he would have had a prohibited transaction.
The amount of his investment would be taxable in the year of the
restructuring (and subject to the 10% early distribution penalty if he was
under age 59 1/2) and he would not have an IRA.
SO BE CAREFUL!!!