Herbert L. Mitchell, deceased, and Ella Marie Mitchell - Page 4

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            also maintained the Pension System, another qualified defined                              
            benefit plan under section 401(a), and the trust maintained under                          
            that plan is also tax exempt under section 501(a).                                         
                  Sometime in early 1991 Mr. Mitchell became interested in                             
            transferring from the Retirement System to the Pension System.                             
            He contacted the Maryland State Retirement and Pension Systems                             
            requesting an estimate of the amount of a refund he would receive                          
            upon such a transfer.  The letter he received in response to his                           
            request, dated April 25, 1991, informed Mr. Mitchell that the                              
            estimated transfer refund would be $666,191.28.  The letter noted                          
            that this refund would be “subject to taxation when received”.                             
            The letter further stated that the Internal Revenue Service had                            
            ruled that the transfer refund was not eligible for a rollover                             
            into another eligible retirement plan either as a partial                                  
            distribution or as a lump sum distribution.  In addition, the                              
            letter advised Mr. Mitchell that he should review the tax                                  
            consequences of receiving the transfer refund with his tax                                 
            adviser or with the Internal Revenue Service.  Petitioner did not                          
            see this letter.                                                                           
                  On May 23, 1991, Mr. Mitchell elected to transfer from the                           
            Retirement System to the Pension System.  As a result, he                                  
            received a transfer refund distribution in the form of two                                 
            checks, dated June 30, 1991, totaling $666,564.51.  He initially                           
            deposited these checks into a bank and later invested the                                  

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