J. Kelly and Martha L. Anderson - Page 2




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          nontaxable on his tax return.  We hold it does.  Unless otherwise           
          indicated, section references are to applicable versions of the             
          Internal Revenue Code.  Rule references are to the Tax Court                
          Rules of Practice and Procedure.                                            
                                  FINDINGS OF FACT                                    
               Many facts were stipulated, and we incorporate by this                 
          reference the parties’ stipulation of facts and the accompanying            
          exhibits.  Mr. Anderson and Martha L. Anderson (Mrs. Anderson)              
          are husband and wife, and they filed a joint 1997 Federal income            
          tax return.  They resided in Fort Worth, Texas, when their                  
          petition was filed with the Court.  Mr. Anderson was born in 1932           
          and holds a bachelor’s degree in commerce.                                  
               In 1993, Mr. Anderson retired from General Dynamics.  In               
          June 1994, Mr. Anderson rolled over $217,847.83 of his funds in             
          the General Dynamics Salaried Employee Plan to an IRA account               
          with National Financial Services Corporation (NFSC).  Before                
          establishing the account with NFSC, an NFSC portfolio                       
          representative explained to Mr. Kelly the significance of an IRA,           
          including its investment options.  Mr. Kelly’s application for              
          the account with NFSC stated at the top that it was an “IRA                 
          Account Application”.                                                       
               On June 2, 1997, Mr. Anderson closed his IRA account with              
          NFSC by withdrawing the balance of $200,688.97; he closed the               








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