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provides that MAGI means adjusted gross income determined without
regard to certain amounts, none of which pertain to a
distribution of IRA funds.
Petitioners argue, however, that the IRA distribution should
not be included in their MAGI because they did not physically
receive any funds. Petitioners’ gross income includes all
amounts received or constructively received as a distribution
from an IRA. See secs. 408(d), 72, 61; Larotonda v.
Commissioner, 89 T.C. 287, 291 (1987); see also Amos v.
Commissioner, 47 T.C. 65, 70 (1966). The nature of that income
is not altered for purposes of computing adjusted gross income,
section 62(a), or modified adjusted gross income, section
32(c)(5), simply because it was deemed constructively received.
3. Respondent’s Allocation of the Entire Proceeds to the Section
6672(a) Liability
Petitioners contend that respondent should have allocated 10
percent of the proceeds of the levy to petitioners’ 1997 tax
liability. The underpinnings of this argument lie in section
3405(b), which provides that the payor of any nonperiodic
distribution shall withhold 10 percent of such distribution.
Dean Witter, the payor, did not withhold any amounts from the
distribution pursuant to the levy on petitioner-husband’s IRA.
Petitioners argue that respondent knew that Dean Witter failed to
withhold this amount, and, therefore, it was respondent’s
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