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community property. During 1993, petitioner withdrew $125,000
from his IRA’s and deposited the proceeds in his money market
savings account. During the same year, petitioner transferred
$111,600 to his former spouse in a transaction in which he
acquired her interest in the family residence. Petitioner
reported only the remaining $13,400 of the distributions on his
1993 Federal income tax returns.
Discussion
Issue 1. Taxability of IRA Distributions
A. Allocation of Tax Liability
We pass for the first time on the question of whether one-
half of community funds contributed to an IRA account established
by an IRA participant are, upon distribution, taxable to the
participant’s former spouse by virtue of the fact that the former
spouse has a 50-percent ownership interest in the IRA under
applicable community property law. Section 408(g), as discussed
below, provides explicitly that section 408 (the statutory
provision governing IRA requirements and the taxability of IRA
distributions) “shall be applied without regard to any community
property laws”. Thus, at first blush, it appears that the answer
to our question is that the husband is taxable on 100-percent of
the distribution notwithstanding the fact that his former wife
owned and was entitled to receive 50 percent of the distributed
proceeds. As petitioner observes, however, the Commissioner
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