- 9 - amount is not properly includable in 1986, the 6-year limitations period will not apply and the other adjustments set forth in the notice of deficiency will be barred since the sum of those other adjustments does not exceed 25 percent of petitioners' gross income. The Court, in Fazi I, did not purport to decide the taxability of amounts in 1986; it could only determine tax liability for 1987. Sec. 6214(b). Taxability of the Merged Amount In this case, respondent originally argued that the merged amount was taxable to petitioners in the year of merger, 1986. She now concedes that the merged amount should have been taxed in 1987, the year it was distributed to petitioners.6 Respondent states on brief that: Upon reconsideration, however, respondent's interest in sound tax administration requires that she inform the Court that she has reached a different conclusion. The correct result in Fazi I would have been to include the full amount of Plan 002 assets in petitioners' income for 1987. In respondent's view, the merger of Plan 002, a qualified plan, with Plan 001, a nonqualified plan, resulted in the immediate disqualification of Plan 002. The 1986 merger did not represent a "contribution" to Plan 001, but rather a pooling of nonqualified assets all of which should have been taxed on distribution in 1987, consonant with the remainder of the Court's opinion in Fazi I and with I.R.C. sec. 402(b)(2) and Treas. Reg. sec. 1.402(b)-1(c). In Fazi I, we accepted respondent's concession that the merged amount was not taxable in 1987. Consequently, we are reluctant 6 Respondent, in Fazi I, originally argued that the merged amount was taxable to petitioners in 1987, but later conceded that it was properly taxable in 1986. Hence, respondent's position on this issue has come full circle.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011