- 13 - excludable from gross income. The amount of a distribution allocable to the investment in the contract, and thus distributed tax-free, is the portion of the amount received that bears the same ratio to the amount received as the investment in the contract bears to the account balance. Sec. 72(e)(8)(A) and (B). In determining the taxability of petitioner's IRA distribution from Loyola, it is necessary to determine the amount of the distribution allocable to the "investment in the contract". In dispute in this case is the meaning of the phrase "aggregate amount of * * * consideration paid for the contract" found in section 72(e)(6), and whether the phrase encompasses the excess contribution made by petitioner in the amount of $80,900. If petitioner's contribution is considered to be an amount paid in consideration for an IRA and, thus, is an "investment in the contract", then section 72 would provide a basis for petitioner's excess contribution and, upon distribution, such amount would be distributed tax-free. However, if petitioner's excess contribution is not consideration paid for an IRA and, thus, is not an "investment in the contract", then section 72 would not provide a basis in petitioner's excess contribution and, upon distribution, such amount would be taxed in full. The parties agree that the plain meaning of the language in section 72(e)(6), i.e., "amount of * * * consideration paid for the contract", would include petitioner's excess contribution.Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
Last modified: May 25, 2011