CLIENT STATED IR RESEARCHED HER LINCOLN ANNUITY AND IR INFORMED CLIENT SHE COULD DISTRIBUTE $60,000/YEAR (FREE FROM CAPITAL GAINS TAX) FOR FOUR YEARS UNTIL THE $300,000 HAD BEEN TRANSFERRED OVER TO HARTFORD (VARIABLE LIFE POLICY). CLIENT INDICATED SHE PREVIOUSLY TRANSFERRED MONEY FROM THE ANNUITY AND NO TAXES WERE PAID. CLIENT STATED SHE AND IR WENT TO SEE AN ATTORNEY REGARDING A REVOCABLE LIVING TRUST/WILL. CLIENT FURTHER STATED IR GAVE HER A BLANK DISTRIBUTION REQUEST TO SIGN AND CLIENT IS UPSET THE FUNDS WERE WIRED AND CLIENT WAS CHARGED A $25 FEE. CLIENT INDICATED IN FEBRUARY 2004 SHE RECEIVED A 1099 AND CONSULTED A CPA. CLIENT WAS INFORMED SHE OWES $15,789 IN TAXES AND PENALTY FEES. CLIENT FEELS IR MISREPRESENTED THE FACTS ASSOCIATED WITH THE TRANSACTION AND IS REQUESTING REIMBURSEMENT IN THE AMOUNT OF $75,814.

$75,814.00

$66,926.00

WE HAVE BEEN IN CONTACT WITH THE IR, LINCOLN LIFE AND HARTFORD LIFE REGARDING CLIENT'S CONCERNS. AS A RESULT OF OUR DISCUSSIONS WITH HARTFORD LIFE, AN OFFER TO RESCIND THE CONTRACT WAS MAILED ON JULY 14, 2004. WE ALSO HAD DISCUSSIONS WITH LINCOLN REGARDING THE CLIENT'S ANNUITY. LINCOLN PROVIDED A COPY OF A LETTER SENT DIRECTLY TO THE CLIENT ON JANUARY 29, 2002, WHICH CLEARLY STATED THE WITHDRAWAL ON OCTOBER 31, 2003 WOULD BE FULLY TAXABLE. IT IS EVIDENT FROM OUR REVIEW THAT THE CLIENT OR HER HEIRS WOULD HAVE EVENTUALLY HAD TO PAY TAXES ON THIS WITHDRAWAL FROM THE ANNUITY. THAT BEING SAID, THE FIRM IS OF THE OPINION THAT BECAUSE CLIENT LOST THE ABILITY TO FURTHER DEFER THIS TAXABLE CONSEQUENCE, WE WILL OFFER TO REIMBURSE THE CLIENT FOR A PORTION OF THE TAXES INCURRED WITH THE 2003 $60,000 DISTRIBUTION. THE FIRM PROVIDED A SETTLEMENT OFFER IN THE AMOUNT OF $6,100, WHICH INCLUDED A PARTIAL REIMBURSEMENT OF TAXES ASSOCIATED WITH THE LINCOLN ANNUITY WITHDRAWAL, INTEREST, WIRE TRANSFER FEE AND STATE PREMIUM TAX PAID ON THE HARTFORD POLICY. (THE STATE PREMIUM TAX MUST BE WITHHELD BY HARTFORD LIFE IF THE CONTRACT IS RESCINDED.) ON JULY 19, 2004, THE CLIENT VERBALLY REJECTED THE FIRM?S OFFER. ON JULY 27, 2004, THE FIRM SENT A FINAL COUNTEROFFER IN THE AMOUNT OF $8,000. CLIENT ACCEPTED THE FINAL OFFER ON AUGUST 3, 2004. THE CLIENT ALSO RECEIVED $58,926 FROM HARTFORD LIFE UPON CLIENT'S RESCISSION OF HER INSURANCE CONTRACT.