qbteachmt
Level 15

Start with the basics, that the issuer only knows what they know. They also interpret what they should be marking, differently.

Remember, all of these terms matter. They mean different things; there are different requirements and provisions. You cannot just use the word Account. Roth Account? Traditional IRA Account? So, you need to know which account type this is. "and they told me this account was from a rollover from years ago when leaving employment" would be moot, now, unless there was Basis, which they would have seen on the initial rollover, if that was also a conversion.

And the issuer has no idea if there was Basis in that account or not; hence, they don't know about taxable amounts. That doesn't make it all taxable, and that doesn't make it partially taxable. It simply means, "Do not ask us. Ask the taxpayer."

"They removed the investment"

Let's restate it: They took a total distribution...

"to purchase a rental house for investment."

There is no known exception to Taxability or Early Distribution Penalty for removing your retirement funds to do this, unless they got guidance to buy the rental house within their self-directed IRA, which is one of those "get rich quick" lessons you can pay to learn about. It's a bit of a dumb idea, but people do it.

"They don't know much more than that"

Then let's assume:

1. They did not do this inside of a self-directed IRA.

2. They should never be running a self-directed IRA. They do not pay attention to enough details to take on that responsibility.

"They are not yet 59 1/2, but I think they have had the account for more than 5 years."

It's only Roth IRA that has any 5-year rules to be met.

"Since they are not sure and can't give me any proof of contributions, do I just enter it as all taxable?"

You have to start with the Account Type.

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