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income on the contract and not includable in income to the extent
allocable to the investment in the contract.6
Section 408(d)(4) sets forth an exception to the foregoing
general rule. As applicable to the present case, section
408(d)(4) provides that if an excess contribution is distributed
to and received by the contributor on or before the due date of
the return (including extensions) for the year of the excess
contribution, then such excess contribution is not includable in
the contributor's gross income.7
Petitioner made total excess contributions to her three
IRA's in the amount of $309,534.81 (i.e., $311,534.81 less
6 Under sec. 72(c)(4), "annuity starting date" is defined as
the first day of the first period for which an amount is received
as an annuity under the contract. Petitioner received a single
payment in the amount of $97,227.74 from her First American IRA's
prior to drawing annuity payments from her First American IRA's.
Thus, the distribution was received by petitioner before the
annuity starting date and, accordingly, sec. 72(e)(2)(B) applies.
7 Sec. 408(d)(4) provides:
(4) Contributions Returned Before Due Date of
Return.-- * * * [section 72] does not apply to the
distribution of any contribution paid during a taxable
year to an individual retirement account * * * if--
(A) such distribution is received on or
before the day prescribed by law (including extensions
of time) for filing such individual's return for such
taxable year,
(B) no deduction is allowed under section 219
with respect to such contribution, and
(C) such distribution is accompanied by the
amount of net income attributable to such
contribution.
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