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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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