William J. Broedel and Joan C. Broedel - Page 16




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          Commissioner, T.C. Memo. 1996-50.  Accordingly, we hold that the            
          entire $58,372.50 is includable in petitioners’ 1994 gross                  
          income.                                                                     
          Income From Satisfaction of Mr. Broedel’s Loan Against His                  
          Retirement Account                                                          
               Respondent argues that petitioners received income in 1994             
          because of the satisfaction of Mr. Broedel’s outstanding loan               
          against his NYRS retirement account.  Petitioners argue they did            
          not realize income because the NYRS deducted the loan amount from           
          Mr. Broedel’s retirement account when it was not repaid.                    
               At the time of his retirement, Mr. Broedel had an                      
          outstanding loan against his retirement funds.  Mr. Broedel was             
          given the option of repaying the loan.  Mr. Broedel chose not to            
          repay the loan, and the NYRS apparently satisfied the loan by               
          deducting the loan balance from Mr. Broedel’s retirement account            
          balance.  The NYRS issued Mr. Broedel a Form 1099-R for 1994                
          reflecting a taxable amount of $13,393.54, representing the                 
          outstanding loan balance.  Petitioners did not report this amount           
          on their 1994 tax return.  Petitioners did not present testimony            
          at trial on this issue, and they did not argue this issue on                
          brief.  Petitioners addressed this issue only in their petition             
          and trial memorandum, in which they claim that the loan amount              
          was “repaid” because the NYRS deducted the loan amount from Mr.             
          Broedel’s retirement account.                                               







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