Timothy W. and Suzanne M. Coffield - Page 4

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          the notice of deficiency respondent determined that petitioners             
          were liable for income tax on the portion of the distribution               
          reported as taxable income on the Form 1099-R ($25,709).                    
          Respondent further determined that the 10-percent additional tax            
          imposed by section 72(t) applied to this amount, and that                   
          petitioners were liable for a negligence penalty pursuant to                
          section 6662(a).                                                            
                                       OPINION                                        
          Savings Plan Distribution                                                   
               Under section 402(a) any distribution from any employees'              
          trust described in section 401(a) that is exempt from tax under             
          section 501(a) shall be taxable to the distributee in the year of           
          distribution under section 72.2  Section 72(e) provides that the            
          amount received is includable in gross income, except to the                
          extent attributable to an individual's investment in the                    
          contract.  For our purposes here, petitioner's investment in the            
          contract is the amount of his "after-tax contributions".                    
               Section 402(a)(5) excludes from gross income any portion of            
          a distribution from a qualified trust that is transferred to an             
          eligible retirement plan.  The term "eligible retirement plan" is           
          defined as (1) an individual retirement account described in                


          2   The parties agree that the savings plan constitutes a                   
          "qualified plan".  We presume this means a "qualified trust"                
          within the meaning of sec. 401(a), which is exempt from tax under           
          sec. 501(a), because neither party has argued to the contrary.              




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