I'm sorry I was incomplete. My client had a stock broker who setup her traditional IRA which had no basis. He called her to tell her he was retiring and had sold his business to a broker who she should trust. Within days the new broker called her to solicit her to roll her IRA into a better investment. The referring broker has since been barred from the securities industry for his illegal activity with this Ponzi scheme. My client met with the new broker who had a withdrawal form filled out for her to sign. He told her to call him when the check arrived. He came to her house and had her endorse the check over to "Quest IRA" FBO her name. The check cleared her account. The broker later had her sign a phony IRA application and a subscription to a phony promissory note issued by First Nationle Solution. When I met her in March as usual to do her 2017 taxes, I saw the 1099 for the $130,000 withdrawal with the taxable amount shown as not determined. She had brought the other documents she had been mailed. Five minutes of Googling confirmed what I suspected and I told her she had been defrauded and was a victim of a Ponzi scheme. I referred her to attorney who has represent a number of the victim in this $103,000,00 scheme that SEC shut down in June of 2018. The FBI indictments are pending on these men who defrauded over 600 investors. The attorney filed a complaint against the Broker/Dealer who employed her retiring broker. After months they settled for $65,000 in mediation for half her loss. The attorney took his contingency fees and she received $37,000. I worked with her and her IRA custodian and she was able to deposit a "restorative payment" of the $37,000 in to her existing legitimate IRA.  So to answer your question no she did not roll it because the company she thought would receive the money as custodian never got the money. It was diverted to the crooked broker.  The check was deposited in an account held by a phony company, First Nationle Solution and controlled by the broker. I have the copy of the endorsed check.  IRS allows Restorative Payments for taxpayers who are victims of this kind of fraud. So it will be easy for me to protect the $37,000 from tax as it is back in the IRA. But what about the rest? Can she use other funds to restore the $28,000 she was awarded in mediation but was paid over to the law firm before she received her $37,000? And what about the $65,000 lost to the fraud? The SEC investigation states the money taken was spent on lavish living and little to no assets exist with which to restore victims. I can seek a Private Letter Ruling, but there should be an easier way to help this 75 year old woman. Any ideas?

We had the same thing happen in our community, with SEC ultimately doing some recovery.

From your description, it sounds like there is a taxable distribution in 2017 for $130,000. The client did all the right steps to do a rollover of the full amount. Was there a 5498 ever issued "by "Quest IRA?" I would have the client order a transcript from IRS for 2017

I "think" the restorative deposit of $37,000 could be considered a rollover, but I also think the $65,000 is an IRA distribution. The attorney fee would fall into a Schedule A Miscellaneous (non existent beginning 2018), or if still within the 60 day period is could be also considered a rollover.

https://www.irahelp.com/forum-post/14640-ira-rollover-ira-lawsuit-settlement-proceeds

https://www.irs.gov/newsroom/help-for-victims-of-ponzi-investment-schemes

There was never going to be a 5498 because although Quest IRA is a legitimate company, the scammer never involved them expect to borrow the name long enough to convince my client to endorse a check over with their name on it. It was deposited into the scammer's account with the bogus company that did not exist. It is hard for me to believe IRS would have this woman pay tax on money that was never invested and that she never received. I can see the requirement for her to make restorative payments if there is any recovery.  The legal fees were incurred in 2017. The revenue rulings addressed in your second link apply to non qualified losses or losses for which there is a basis. I will contact IRS and get information and if necessary go to our Tax Payor Advocate locally in Fresno. Maybe she can file a protest. A lot of these rip off Ponzi Schemes are happening in qualified plan withdrawals.  The legal fees were not incurred until 2018. It is odd that there is no PLR.

"... My client had a stock broker who setup her traditional IRA which had no basis."   NO BASIS is the key here.