- 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).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
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