So my father has been going through a rough period in his life and I have taken over his finances for the time being.
He recently received a 1099 from a self-directed IRA custodian. Essentially he did not pay fees to the custodian and so they distributed the entire IRA to him for nonpayment of fees. The problem, beyond the tax implications, is that the assets in the IRA are three promissory notes from an LLC which are worthless. The reason they are worthless is that they are past the statute of limitations (from '07-'09), they are in default, and the owner of the LLC has previously been convicted of securities fraud (basically this guy scammed my dad out of 550k and my dad did nothing.) The total value of the notes according to the 1099 is 600k+, hence the 300k tax bill.
So the question is: what is the best way to proceed to avoid 300k in taxes on a worthless asset? My father has not filed his taxes for 2017 yet. My suspicion is that he'll want to declare the assets worthless somehow and so amend the 1099 to show 0 distribution of funds. Would this be done through a lawyer (if so what kind of lawyer); or, is this something I can do myself? Need help here because I only have a couple days of vacation to get this sorted out! Thanks a bunch!
Update: Spoke to an attorney. He suggested talking to a CPA whom in turn suggested sending a 1099-C to both the issuer of the debt and the IRS; then, wait to hear back from the IRS.
Submitted June 19, 2018 at 09:56AM by th9091 https://ift.tt/2tmdo6c
