Ronny H. and Charlotte A. Schmalzer - Page 2

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          After a concession by respondent,2 the issues for decision are:             
          (1)  To what extent are petitioners taxable on withdrawals from             
          an Individual Retirement Account (IRA) during 1992; and (2)                 
          whether petitioners are liable for the additional tax under                 
          section 72(t).  The facts stipulated by the parties in the                  
          stipulation of facts and the supplemental stipulation of facts              
          are incorporated herein by reference.  Petitioners resided in               
          Eagle Rock, California, at the time their petition was filed with           
          the Court.                                                                  
               During the years 1985 through 1992, petitioner Ronny H.                
          Schmalzer (petitioner) was employed in the lithography business             
          by various employers.  Several of petitioner’s employers during             
          this period had pension plans in which petitioner may have been             
          eligible to participate or in which he did participate.                     
               On November 29, 1985, petitioner established an IRA with the           
          purchase of a variable rate certificate at California Federal               
          Savings and Loan.  The record title for the certificate was                 
          “California Federal Savings and Loan as Trustee for Ronny H.                
          Schmalzer Under the IRA League Retirement Plan”.  The initial               
          deposit for this certificate was $1,000.3  Subsequently from time           


          2  Respondent conceded that the petitioners are entitled to                 
          the mortgage interest deduction claimed on their return.                    
          3  Although the certificate shows the initial maturity date                 
          to be May 28, 1985, we believe the date should have been May 28,            
          1987, as the renewal term for the certificate was 1-1/2 years.              




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