Harold L. and Gladys M. Humberson - Page 8

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          set forth on the Form 1099-R, and elected 10-year forward                   
          averaging under section 402(e)(1).  In this regard, petitioners             
          attached Form 4972 (Tax on Lump-Sum Distributions) to their                 
          income tax return and reported on said form ordinary income in              
          the amount of $138,229, i.e., the taxable portion of the Transfer           
          Refund as set forth on the Form 1099-R.  Petitioners then                   
          computed the tax on said amount and included such tax as part of            
          their total income tax liability on page 2 of their Form 1040.              
          Respondent's Notice of Deficiency                                           
               In the notice of deficiency, respondent determined that                
          petitioners do not qualify for 10-year forward averaging.                   
          Accordingly, respondent treated the taxable portion of the                  
          Transfer Refund, which she determined to be $136,094.23, as                 
          subject to the regular income tax.9  Respondent also determined             
          that petitioners are liable for the 10-percent additional tax               
          imposed by section 72(t) based on the distribution in the                   
          foregoing amount.                                                           
               Respondent contends that the Transfer Refund does not                  
          qualify for forward averaging because it does not constitute a              
          "lump sum distribution" within the meaning of section                       

          9 The discrepancy between the taxable portion of the                        
          Transfer Refund as determined in the notice of deficiency, i.e.,            
          $136,094.23, and the taxable portion as stipulated by the parties           
          of that part of the Transfer Refund that was paid to petitioner             
          in March 1990, i.e., $136,681.18, is unexplained in the record.             
          We accept the parties' stipulation.                                         

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