- 20 -
* * *. [H. Conf. Rept. 99-841, at II-379 (1986), 1986-3
C.B. (Vol. 4) at 379; emphasis added.]
This excerpt illustrates that Congress intended to provide a
basis in "nondeductible contributions". However, nowhere in the
legislative history to the TRA of 1986 did Congress address the
tax treatment of excess contributions upon distribution.
Respondent asserts that petitioners' interpretation of
section 72(e)(6) significantly changes the law and creates a
basis in excess contributions where, historically, no basis had
been allowed. To the contrary, it was Congress that
significantly changed the law by creating basis where none had
previously existed. Thus, prior to the TRA of 1986, all IRA
distributions, even those the genesis of which was in after-tax
contributions, were fully taxed to the taxpayer in the year of
distribution because "the basis of any person in [an IRA was]
zero." Sec. 408(d)(1) as originally enacted by ERISA. However,
in the TRA of 1986 Congress amended section 408(d)(1) by striking
the language mandating that taxpayers have a zero basis in their
IRA and by substituting therefor an "investment in the contract"
approach in taxing IRA distributions. This amendment removes the
legislative underpinnings for double taxation upon which
respondent heavily relies in this case.
In 1974, when Congress decided to include in income the
distribution of excess contributions, it clearly and explicitly
required such inclusion in both the language of section 408(d)(1)
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