George and Elam Campbell - Page 1

                                           108 T.C. No. 5                                                

                                      UNITED STATES TAX COURT                                            

                           GEORGE AND ELAM CAMPBELL, Petitioners v.                                      
                         COMMISSIONER OF INTERNAL REVENUE, Respondent                                    

                  Docket No. 12931-95.               Filed February 18, 1997.                            

                        P was a State employee.  In October 1989, P                                      
                  elected to transfer from the State Retirement System to                                
                  the State Pension System effective November 1989.  As a                                
                  consequence, P received a Transfer Refund in 1989                                      
                  consisting principally of previously taxed                                             
                  contributions and taxable earnings.  Shortly                                           
                  thereafter, P deposited approximately one-half of the                                  
                  taxable portion into an IRA with Loyola.                                               
                        P included the entire taxable portion of the                                     
                  Transfer Refund in income on an amended tax return for                                 
                  1989.  See Dorsey v. Commissioner, T.C. Memo. 1995-97.                                 
                        In April 1991, P closed his Loyola IRA.  On a 1991                               
                  tax return, P included in income a portion of the                                      
                  earnings generated by the IRA but not the balance.  P                                  
                  contends that sec. 72(e)(6) provides P with a basis in                                 
                  his IRA equal to the amount rolled over from his                                       
                  Transfer Refund into the IRA.  R contends that such an                                 
                  application of sec. 72(e)(6) is contrary to legislative                                
                        Held, Sec. 72(e)(6) provides P with a basis in his                               
                  entire Loyola IRA contribution, the genesis of which                                   

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