1099 R tax amount not determined checked

[jigarshah19]

I have invested my 401k money in Real estate trust via Custodian. The real estate company bankrupted - Now my custodian keep charging heavy fee for the bankrupted company.  I have closed the account so Custodian company sent me 1099 R shows on box 1 and 2a same amount( e.g $100k) however they also checked box 2b taxable amount not determined and put code 1K- if I Do not change amount of 2a I have to pay almost 25k in taxes plus 10% of penalty of the money which I never received - Custodian comapany say once you close the account we can not change and send you new 1099R- How to use this situation so I Do not pay taxes ( almost 35k) on the money which I never received( I received $0)

[MarilynG1]

I would advise you seek out an attorney for this matter.

You shouldn't change the amounts on a 1099-R (the IRS has a copy).

The Code 1K in Box 7 indicates an 'Early Distribution, with No Known Exception, of IRA Assets not having a readily available FMV'.

If you have documentation that the real estate company bankrupted, and your assets are now worthless, (you lost 100K),  you should qualify for an exception, at least for the 10% penalty.

Do you have any statements or forms showing the activity of your account?  

Here's some info on how to Find a Verified Tax Pro that may be able to help. 

[jigarshah19]

Yes both federal and state agencies declared ponzi scheme.

How come custodian don't know?

Why they checked box 2b? Taxable amount not determined

I don't get single penny then how I pay tax??

[ThomasM125 · Accepted solution]

Clearly, you didn't receive a distribution so you don't have to pay taxes on one. I suggest you enter the income as reported on the Form 1099-R, then you enter a negative adjustment to income for the same amount to cancel it out. That way the IRS will see the Form 1099-R listed on your tax return and won't send you a notice asking you to pay tax on it later on.

You can make that adjusting entry in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the adjustment and the adjustment as a negative number