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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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