We had a call from a brother of a client a few days ago. Here is the situation:

 

His fiance took a full distribution of a ROTH IRA from Broker 1. The money was deposited into her PERSONAL account (took possession - they should have done trustee to trustee but did not). 

 

She then wired the money to Broker 2 to open an account, which unfortunately was set up as a Traditional IRA. The error in setting up the wrong type of IRA was the taxpayers error. The client realized their error at some point (this was all done in the last month). Now they want to put the money back into a ROTH, but Broker 2 is saying it needs to be done as either:

 

     2. Take the traditional IRA and move the assets into a non-retirement account (taxable)

 

Has anyone encountered this? Is there any way for Broker 2 to re-code the account without causing a taxable event?

 

Help is much appreciated! 

 

Gregg