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OPINION
A. Whether Petitioners Must Include in Income $69,500 That
Petitioner Withdrew From His IRA Account in 1996
We first decide whether petitioners must include in income
$69,500 that petitioner withdrew from his Nations Bank IRA in
1996.3 Petitioners contend that they need not do so because:
(1) Petitioner had basis in his IRA; (2) petitioner had paid
taxes on the funds that were deposited in the IRA; and (3) the
thrift savings account lost money in its last 2 years. We
disagree for reasons stated below.
1. Whether Petitioner Had Basis in His IRA When He
Withdrew Funds in 1996
A taxpayer may exclude from income IRA distributions
attributable to after-tax contributions for which the taxpayer
has basis. Secs. 72(e)(6), 408(d)(2); Campbell v. Commissioner,
108 T.C. 54, 66-67 (1997). Petitioners contend that they may
exclude from income $35,317 because petitioner had basis of that
amount in his IRA when he withdrew amounts in 1996. Petitioners
contend that petitioner had $35,317 in his thrift savings account
on September 30, 1995, and that he rolled over that amount to his
IRA. We disagree. Petitioner had no funds in his thrift savings
3 The examination in this case began after July 22, 1998.
Petitioners were aware at trial that the Commissioner bears the
burden of proof if conditions stated in sec. 7491 are met.
However, they do not contend that sec. 7491 applies. Thus,
petitioners bear the burden of proof on this issue. Rule 142(a).
However, the burden of proof does not affect our holding on this
issue.
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Last modified: May 25, 2011