- 20 -
employee's death", "(iii) on account of the employee's separation
from the service", or "(iv) after the employee has become
disabled (within the meaning of section 72(m)(7))". Petitioners
do not contend that the Transfer Refund was received either on
account of petitioner's death or on account of petitioner's
separation from service.18 Rather, petitioners contend that the
Transfer Refund was received "after * * * [petitioner had] become
disabled (within the meaning of section 72(m)(7))" under section
402(e)(4)(A)(iv). Respondent contends to the contrary.19
Our analysis necessarily begins with section 72(m)(7). That
section is explicit as to the meaning of the term "disabled".
Under section 72(m)(7), an individual is considered disabled if
he is "unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of a
18 In other cases we have held that a Transfer Refund is not
received on account of a taxpayer's separation from the service
but rather on account of a taxpayer's election to transfer from
the Retirement System to the Pension System. E.g., Dorsey v.
Commissioner, supra; Hylton v. Commissioner, T.C. Memo. 1995-27.
But see Adler v. Commissioner, 86 F.3d 378 (4th Cir. 1996), revg.
and remanding T.C. Memo. 1995-148.
19 As previously noted, respondent has limited her
contention regarding whether the Transfer Refund constitutes a
partial distribution to the issue of petitioner's disability.
See supra note 17. Accordingly, we consider such issue to be
dispositive of whether the Transfer Refund constitutes a partial
distribution.
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