Peter Spuler, Jr. - Page 8

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          74, 77 (1986).  Petitioner failed to establish that Mr. Spuler              
          made nondeductible contributions to the IRA.2  Thus, the entire             
          distribution is includable in gross income.                                 
               Petitioner additionally argues that he is not liable for tax           
          on the IRA distribution.  Mr. Spuler’s will provides that all               
          Federal, State, and other death taxes associated with the                   
          transfer of property from his estate to his beneficiaries will be           
          paid by his estate, and that none of the beneficiaries are liable           
          for the taxes.                                                              
               State law determines the legal rights and interests in                 
          property and transfers thereof.  However, Federal law determines            
          the manner and extent to which such rights and interests will be            
          subjected to Federal tax.  See Helvering v. Stuart, 317 U.S. 154,           
          161 (1942); Morgan v. Commissioner, 309 U.S. 78 (1940); Estate of           
          Sweet v. Commissioner, 234 F.2d 401 (10th Cir. 1956), affg. 24              
          T.C. 488 (1955); Estate of Bennett v. Commissioner, 100 T.C. 42,            
          59 (1993).  We conclude that the terms of Mr. Spuler’s will do              
          not affect petitioner’s liability for the IRA distribution, and             
          he must include the full amount in gross income.                            
          Deductions for a SEP                                                        
               A SEP plan is described in section 408(k).  An employer may            
          make contributions to an employee’s retirement account.  See sec.           

               2    As a result of our conclusions, we need not consider              
          whether petitioner had a basis in the IRA arising from                      
          nondeductible contributions made by his father.                             

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