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his salary to the section 401(k) account on a pretax basis, and
his employer made matching contributions.
Upon termination of his employment with the railroad,
petitioner rolled his 401(k) account into an individual
retirement account (IRA). In 2003, the custodian of petitioner’s
IRA was Wachovia Securities LLC, and the account consisted of a
portfolio of mutual funds.
Also upon termination of his employment with the railroad,
petitioner sold his Kansas City residence and relocated to the
Denver area, where the cost-of-living, and specifically the cost
of housing, was greater. In 2003, needing money to finance the
purchase of a new home, and being both a single father and
temporarily unemployed, petitioner withdrew $86,333.33 from his
IRA.3 Petitioner used the proceeds, net of withheld taxes, to
help finance the downpayment for his new home.
Petitioner was 46 years old and not disabled in 2003 when he
received the IRA distribution.
Petitioner filed a Form 1040, U.S. Individual Income Tax
Return for 2003. On line 15a of his return, petitioner reported
an IRA distribution of $86,333.33, and on line 15b he reported
3 The distribution did not exhaust petitioner’s account
balance; however, the distribution was not part of a series of
substantially equal periodic payments made for petitioner’s life
(or life expectancy).
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Last modified: November 10, 2007