3
in PERS is compulsory upon being employed, with some exceptions
not relevant herein. During 1990, an aggregate of $133.88 was
withheld from petitioner's wages and contributed to PERS.
As the result of an extremely poor working relationship
between petitioner and his direct supervisor, the Director of the
program, petitioner chose to resign from his position effective
February 1, 1991. At such time, he requested a full refund of
his contributions to PERS. On or about October 22, 1991,
petitioner rolled over the refund of $283.07 into an individual
retirement account (IRA).
Prior to April 15, 1991, petitioners opened two IRAs and
made total contributions thereto of $2,834. Petitioners deducted
this amount on their 1990 joint Federal income tax return and
reported adjusted gross income for 1990 of $59,632.15.
In the notice of deficiency, respondent disallowed the
entire deduction of $2,834 on the ground that petitioner was an
"active participant" in a plan established for employees of a
State or political subdivision or agency thereof during the year
at issue. As such, the limitation of section 219(g) on IRA
contribution deductions was applicable and resulted in the total
disallowance of the amount claimed by petitioners. Petitioner
argues that he was not an active participant within the meaning
of section 219(g)(5) because PERS is a deferred compensation plan
and serves as a substitute for Social Security in the State of
Ohio. Petitioner further argues that it would be inequitable to
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