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On December 6, 1989, petitioner opened two IRA's with First
American Bank (the First American IRA's) and deposited $45,000 in
each account. In opening the First American IRA's, petitioner
read the "terms and conditions" for such accounts that were
enumerated on the IRA application form. The terms and conditions
did not set forth any procedure for withdrawing funds from an
IRA.
Distribution of the First American IRA's
Before she retired, petitioner sought advice from the
Internal Revenue Service (IRS) and the Maryland State Retirement
Agency (MSRA) regarding the taxability of a Transfer Refund.
Employees from the IRS advised petitioner that the Transfer
Refund would be considered a lump-sum distribution and that it
would qualify for tax-free treatment if the distribution were
rolled over into an IRA within 60 days of receipt. Petitioner's
contact with the MSRA also led petitioner to believe that the
Transfer Refund was eligible for tax-free rollover treatment.
Thus, at the time petitioner received the Transfer Refund, she
thought that the taxable portion qualified for tax-free rollover
treatment.
On March 28, 1990, the MSRA mailed a letter to all Transfer
Refund recipients, including petitioner, indicating that the
Transfer Refund was probably a taxable distribution. The letter
advised the Transfer Refund recipients to contact a tax adviser
or the IRS if they had any questions.
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