Thanks as the client did receive a letter from the IRS indicating that the 2nd 1099-R should be included as income on the return. I reviewed the client 403b statements from inception until the account was transferred to the new plan administrator and only one loan was taken during the duration and only one withdrawal from the account for the loan in question. The IRS is telling me the plan administrator needs to correct the 1099-R and re-issue but the plan administrator is saying that the 1099-R's are correct as issued. I have never seen anything like it. I wrote a letter to the IRS stating that the one 1099-R was in error and the only taxable amount is the loan default amount with no response. In the mean while the interest and penalties are racking up for the client. The IRS recommended to pay the amount due and then once the plan administrator corrects the 1099-R then the client can file an amended return. This is a crazy solution when in fact I know that it is inaccurate. I am going to schedule a in person meeting with an IRS agent to try to resolve the situation as correspondence does not appear to be working. Thank for your response as you confirmed that my position is correct.