Steven M. and Michele E. Grow - Page 2

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            Petitioners resided in Cary, North Carolina, at the time they                                  
            filed their petition.                                                                          
                  The issues are: (1) Whether petitioners are liable for                                   
            income tax on a distribution from a profit sharing plan pursuant                               
            to section 402(a); and (2) whether petitioners are liable for an                               
            early withdrawal penalty, on the same distribution, pursuant to                                
            section 72(t).                                                                                 
                                          FINDINGS OF FACT                                                 
                  In 1991, Stephen M. Grow (petitioner) worked for Dun &                                   
            Bradstreet, Inc. (Dun & Bradstreet) in Tampa, Florida, where he                                
            lived with his family.  During 1991, Dun & Bradstreet transferred                              
            petitioner to Raleigh, North Carolina.  Petitioner purchased a                                 
            house in nearby Cary, North Carolina, in October 1991.  Because                                
            petitioner was unable to sell his house in Tampa, he withdrew                                  
            $29,000 from his profit sharing plan at Dun & Bradstreet to make                               
            a downpayment on the house in Cary.  The withdrawal constituted                                
            approximately one-half of the value of petitioner's account.  No                               
            portion of the withdrawn amount was rolled over into another                                   
            retirement account.  Dun & Bradstreet sent petitioner a Form                                   
            1099-R reporting taxable income in the amount of $26,110,                                      
            consisting of the $29,000 withdrawal reduced by a prorated                                     
            portion of petitioner's investment in the contract.                                            
                  On their jointly filed 1991 Federal income tax return,                                   
            petitioners did not report any income as a result of the                                       
            distribution.  In the notice of deficiency, respondent determined                              




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