G. Richard and Sara B. Childs - Page 5

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               In response to the March 28, 1990, letter, petitioner                  
          Richard Childs requested tax advice from Martin F. Malarkey III,            
          Chief of the Quality Assurance Branch of the IRS.  In                       
          anticipation of a forthcoming ruling concerning the tax                     
          consequences of the Transfer Refund, Mr. Malarkey advised                   
          petitioners to apply for an extension of time to file their 1989            
          Federal income tax return.  Mr. Malarkey further advised                    
          petitioners to withdraw all funds from their IRA's prior to the             
          extended due date for filing and to include the amounts withdrawn           
          in their gross income for 1989.                                             
               On April 12, 1990, petitioners applied for and received an             
          automatic, 4-month extension of time to file their 1989 income              
          tax return.  Petitioners' return for that year was therefore due            
          on or before August 15, 1990.                                               
               On July 10, 1990, the IRS issued a ruling (the IRS ruling)             
          in which the IRS concluded that Transfer Refunds did not                    
          generally qualify for tax-free rollover treatment.                          
               Petitioners were aware that the IRS ruling required them to            
          include the taxable portion of petitioner's Transfer Refund,                
          i.e., $311,534.81, in their gross income for 1989.  Petitioners             
          were also aware that if they did not withdraw the funds from                
          petitioner's IRA's on or before August 15, 1990, then the IRS               
          would also seek to tax such amount upon distribution from the               
          IRA's.                                                                      






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