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contribution in 1987.4 Petitioners’ tax returns from 1988
through 1991 are part of the record and reflect that petitioners
did not claim any deduction for contributions to the IRA account
for 1989, 1990, and 1991, but did claim a $300 deduction for a
contribution in 1988.
On their 1992 Federal income tax return, petitioners did not
disclose the receipt of the distribution from the IRA account and
did not report any amount as taxable income. In the notice of
deficiency respondent determined that the $6,100 withdrawn from
the IRA account in 1992 is includable in petitioner’s gross
income, pursuant to sections 408(d)(1) and 72.
Petitioners contend that they are entitled to exclude from
gross income the IRA distributions on the grounds that they had a
basis in the IRA contributions. Respondent contends that
petitioners had a zero basis in the contributions.
Generally, taxpayers do not have a basis in IRA
contributions that were made prior to 1987. Section 408(d)(1),
as in effect for 1986 provides: “Notwithstanding any other
provision of this title * * * the basis of any person in such an
account or annuity is zero.” For contributions made after 1986,
however, taxpayers are allowed a basis in IRA contributions to
4 The exhibit containing most of the 1987 return does have a
“data sheet” which, if closely examined, lends the inference that
no IRA contribution was deducted but does not permit any
inference as to whether any IRA contribution was made.
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Last modified: May 25, 2011