IRA Owner Taxed on Distribution, Even Though Funds Were Improperly Rolled into IRA

A deceased husband’s IRA was incorrectly rolled over into an IRA of his widow, instead of being paid to his estate. The widow then distributed funds from the IRA to her stepson.

The Tax Court held that the widow was taxable on the funds distributed from the IRA under normal IRA distribution rules, even though the funds appear to have come from the erroneously rolled over IRA of her deceased husband. . .