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Petitioners, however, are entitled to exclude from gross
income the portion of Mr. Howle’s benefits received in November
and December that is attributable to his contributions.
Mr. Howle’s total employee contributions are $20,365.56. The
number of anticipated monthly payments is 260. See sec.
72(d)(1)(B). Thus, petitioners may exclude $156.66 ($20,365.56
divided by 260 and multiplied by 2) of their Tier 2 benefits.
See id. Because Mrs. Howle had no employee contributions, all of
her Tier 2 benefits are taxable.
No part of an employee’s contribution is allocable to a
supplemental annuity. See sec. 72(r)(2)(C). Thus, the $516
Mr. Howle received as a supplemental annuity benefit is fully
includable in petitioners’ gross income.
In view of the discrepancies among respondent’s computations
of petitioners’ income for 1997, we direct that a computation
under Rule 155 be made.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
under Rule 155.
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