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Respondent determined a deficiency in petitioners' Federal
income tax for 1994 in the amount of $2,327.
The issues for decision are: (1) Whether petitioners are
required to include in their gross income any amount of a
distribution from a qualified stock bonus plan; (2) whether the
amount of the distribution which must be included in their gross
income, if any, is subject to the section 72(t) additional tax;
and (3) the amount and character of the gain that petitioners are
required to include in their gross income from the subsequent
sale of a portion of the distributed stock.
Some of the facts have been stipulated and are so found.
The stipulations of fact and attached exhibits are incorporated
herein by this reference. Petitioners resided in Terrace Park,
Ohio, on the date the petition was filed in this case. All
references to petitioner in the singular are to Sheri L.
Villarroel.
Petitioner worked as an employee of Oral B Laboratories
(Oral B), a subsidiary of the Gillette Company (Gillette), for at
least 5 years as of October 1994. By reason of her length of
employment, petitioner was eligible to participate in Gillette's
employee stock ownership plan (ESOP) when it was established in
1990. Gillette made automatic contributions to the ESOP on her
behalf. She was not permitted to make any contributions to the
ESOP on her own behalf. The contributions and the earnings on
the contributions were invested in a special class of Gillette
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