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$9,750.96, and a zero tax liability. However, MHI did not file
an income tax return for the taxable years 1998, 1999, and 2000.
2. The Investment Property
On June 26, 1998, MHI entered into a “Single/Multi Family
Purchase and Sales Agreement” with Marianna Laliberte (seller) to
purchase a one-family cottage at 168 Veazie Street, Providence,
Rhode Island 02908 (Veazie property) for $52,250. MHI placed a
$2,600 deposit towards the purchase price and the parties
scheduled the closing date for July 14, 1998.
Pursuant to the Veazie property purchase agreement,
petitioner directed Fidelity Investments to wire transfer a
portion (i.e., $49,997.15) of one of his IRAs (Fidelity IRA) to
MHI’s corporate bank account at First Bank and Trust Co.
Fidelity Investments completed this transaction on July 8, 1998.
Fidelity Investments sent petitioner a 1998 Form 1099-R,
Distributions From Pensions, Annuities, Retirement or Profit-
Sharing Plans, IRAs, Insurance Contracts, etc., that reported a
gross distribution of $49,997.15 and a taxable amount of
$49,997.15.6
On July 14, 1998, MHI used petitioner’s Fidelity IRA
distribution to pay the Veazie property purchase price balance of
$49,650. The seller conveyed title to the Veazie property to
6 Petitioner does not suggest that Fidelity Investments
mistakenly issued a Form 1099-R that designated the Fidelity IRA
transfer incorrectly as an IRA distribution.
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