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the cost or other basis of such securities to the plan. Sec.
1.402(a)-1(b)(2)(i), Income Tax Regs.
Petitioner's distribution constitutes a lump sum
distribution because her entire account balance was distributed
to her during her 1994 taxable year on account of her separation
from service. Sec. 402(d)(4)(A)(iii). Petitioners are therefore
entitled to exclude from their gross income an amount equal to
the NUA in the 302 shares of Gillette common stock which were
distributed to petitioner. This amount was determined by
respondent, from information reported by the distributor, to be
$13,002.30. We find respondent's determination on this point to
be correct and reject petitioners' arguments to the contrary.
Based on the record, we find that petitioners failed to
report a distribution from the Gillette ESOP in the amount of
$22,323.10, of which $13,002.30 is attributable to the NUA in the
Gillette common stock. Accordingly, we hold that they are
required to include in their gross income the portion of the
distribution, $9,320.80,3 which is not attributable to the NUA.
3 This amount equals the sum of the cash distributed in
the amount of $217.39 and $9,103.41. The later figure is the
excess of the fair market value of the stock at the time of the
distribution over the NUA in the stock in the amount of
$9,103.41. Petitioner's basis in the stock, for purposes of her
subsequent sale of the stock, is equal to the amount of such
excess. See sec. 1.402(a)-1(b)(1)(i), Income Tax Regs.
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