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Neither the Internal Revenue Code nor the applicable
regulations provide specific guidance on whether an amount is
considered to have been “paid or distributed out of an individual
retirement plan” in the circumstances here. If, on petitioner’s
instructions, Pershing had paid the $40,000 to S.K. for its
stock, there simply would have been an investment in an asset of
the IRA, and there would have been no question whether there had
been a distribution to petitioner. Similarly, if Pershing had
delivered the check to a broker who had purchased the shares for
petitioner’s IRA account, there would have been no distribution.
The broker would have been Pershing’s agent. The question then
is whether, when Pershing delivered the check made out to S.K. to
petitioner, who in turn delivered it to S.K. to purchase the
stock for the IRA account, there was a distribution to
petitioner. We point out that the question does not involve
whether there was a nontaxable rollover of the IRA assets within
the period specified by section 408(d)(3).
In Diamond v. Commissioner, 56 T.C. 530, 541 (1971), affd.
492 F.2d 286 (7th Cir. 1974), we noted: “We accept as sound law
the rule that a taxpayer need not treat as income moneys which he
did not receive under a claim of right, which were not his to
keep, and which he was required to transmit to someone else as a
mere conduit.”
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Last modified: May 25, 2011