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The parties agree that Mr. Logsdon elected under 5 U.S.C.
section 8343a to receive an alternative annuity consisting of a
lump-sum credit and a reduced annuity. The parties also agree
that Mr. Logsdon's contributions to the CSRS should be recovered
tax free. Consequently, this case does not involve the question
of whether Mr. Logsdon can recover his contributions tax free but
rather when that recovery should occur.
While petitioners acknowledge that the CSRS plan, in which
Mr. Logsdon participates, is a defined benefit plan, they argue
that Mr. Logsdon's contributions were made to a separate account
in the CSRS, thus satisfying the separate-account requirement of
section 414(k). Thus, petitioners assert that his receipt of the
lump-sum credit in 1991 was simply a tax-free return of his
contributions. Respondent, however, contends that case law is
settled that the lump-sum credit must be reported as taxable
income in the year received pursuant to section 72(e)(2).
Petitioners concede that for a separate account to be
recognized as a defined contribution plan for purposes of section
414(k), it must have some of the characteristics of a defined
contribution plan. Section 414(i) defines a defined contribution
6(...continued)
(2) for purposes of [section] 72(d) * * * be
treated as consisting of a defined contribution plan to
the extent benefits are based on the separate account
of a participant and as a defined benefit plan with
respect to the remaining portion of benefits under the
plan * * *
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