- 9 -
taxable,7 the court found that the individual accounting for
Guilzon's contributions satisfied the separate-account
requirement of section 414(k). Id.
The Court of Appeals for the Ninth Circuit addressed
petitioners' argument in Malbon v. United States, 43 F.3d 466
(9th Cir. 1994), the controlling decision in the Court of Appeals
to which an appeal in this case would lie. See Golsen v.
Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.
1971). In Malbon v. United States, supra, the taxpayer retired
under the CSRS in 1987 and elected the alternative annuity under
5 U.S.C. sections 8342(a) and 8343a, receiving a lump-sum credit
and a reduced annuity. Malbon also contended that his
contributions were placed into a separate account in the CSRS,
constituting a separate account pursuant to section 414(k) and,
consequently, were not taxable. The Ninth Circuit rejected
Malbon's argument and the reasoning of the Fifth Circuit in
Guilzon. Malbon v. United States, supra at 469-470. Instead,
the court reasoned that
A defined benefit plan provides a benefit regardless of
the contribution amount or the success of the
investments. The amount of the benefit is guaranteed
based on years of service and salary at time of
retirement. A defined contribution plan, however,
provides a benefit dependent on the investment
performance of the contributions. The employee is not
7The Court of Appeals for the Fifth Circuit held that
Guilzon's lump-sum credit was taxable because the CSRS did not
provide a benefit derived from employer contributions as required
by sec. 414(k).
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