- 15 -
Income Tax Regs., 40 Fed. Reg. 1016 (Jan. 6, 1975), petitioners
are barred from electing 5-year averaging.8
Petitioners have also not demonstrated that they are
eligible for capital gains treatment. They have presented no
evidence or argument attempting to establish that they are
entitled to capital gains treatment. Prior to 1986, section
402(a)(2) of the Code as then in effect permitted capital gains
treatment for the portion of certain lump sum distributions from
pension plans that was attributable to plan participation before
1974. The Tax Reform Act of 1986 (TRA 1986), Pub. L. 99-514, 100
Stat. 2085, prospectively eliminated capital gains treatment for
lump sum distributions. However, taxpayers who attained age 50
before January 1, 1986, could elect to have the pre-TRA 1986 law
apply. See TRA 1986, sec. 1122(h)(3)(A), (C), 100 Stat. 2470-
2471. Respondent concedes on brief that petitioner had reached
age 50 before January 1, 1986. Thus, petitioner meets the
threshold requirement of the transitional relief. However,
petitioner must still satisfy the requirements of the pre-TRA
1986 law in order to get capital gains treatment. Under the pre-
TRA 1986 law, capital gains treatment was available only if the
taxpayer was an active participant in the plan prior to January
8 The same would be true if petitioners had attempted to
elect 10-year averaging. Even if petitioners met the age
requirement for the transitional relief provided in TRA 1986,
sec. 1122(h)(5), 100 Stat. 2471-2472, application of that
provision would still require a valid election under sec.
402(e)(4)(B).
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