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notice of deficiency, respondent determined that the Transfer
Refund was not eligible for tax-free rollover treatment under
section 402(a)(5). Therefore, respondent determined that, under
sections 402(a)(1) and 72, the taxable portion of the Transfer
Refund was includable in petitioners' gross income. As
corollaries to this determination, respondent also determined
that petitioners are liable for: (1) The 10-percent additional
tax under section 72(t), (2) the excise tax under section 4973 on
excess contributions to individual retirement accounts, and (3)
the excise tax under section 4980A for excess distributions from
qualified retirement plans.7
OPINIONOPINION
I. Rollover Issue
Petitioners contend that the Transfer Refund received by
petitioner from the Retirement System was paid "on account of
[petitioner's] separation from the service" within the meaning of
section 402(e)(4)(A)(iii). Respondent contends to the contrary.
The parties agree that our resolution of this matter will dictate
whether or not the Transfer Refund qualifies as a partial
distribution eligible for rollover treatment under section
402(a)(5)(D) and consequently whether or not petitioners are
liable for the deficiency that respondent determined.
7 See supra note 3 regarding respondent's concession as to
petitioner Lynne M. Wittstadt.
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