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A Judgment of Dissolution of Marriage between petitioner and Ms.
Jones was filed on January 5, 1995, terminating the marital
status of petitioner and Ms. Jones as of December 24, 1994.
Petitioner’s 1994 Federal income tax return, which he filed
on July 15, 1996, did not report the $68,121 distribution from
the Prudential IRA as income.
Discussion
Issue 1. Taxability of the IRA Distribution
Section 408(d)(1) provides that any amount distributed from
an IRA “shall be included in gross income by the payee or
distributee, as the case may be, in the manner provided under
section 72.” Petitioner contends that by endorsing his IRA
distribution check to his spouse, whom he was divorcing, he
complied with an exception to section 408(d)(1) contained in
section 408(d)(6), which provides:
(6) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE.--
The transfer of an individual's interest in an individual
retirement account or an individual retirement annuity to his
spouse or former spouse under a divorce or separation instrument
described in subparagraph (A) of section 71(b)(2) is not to be
considered a taxable transfer made by such individual
notwithstanding any other provision of this subtitle, and such
interest at the time of the transfer is to be treated as an
individual retirement account of such spouse, and not of such
individual. Thereafter such account or annuity for purposes of
this subtitle is to be treated as maintained for the benefit of
such spouse.
As set forth, there are two requirements that must be met
for the exception of section 408(d)(6) to apply: (1) There must
be a transfer of the IRA participant's "interest" in the IRA to
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