- 10 - provides an exception to the general rule where the entire amount received is rolled over into an IRA or individual retirement annuity for the benefit of the distributee within 60 days after the receipt of the distribution. Additionally, distributions are not includable in a distributee's income to the extent that any distribution, or any portion of any distribution, is allocable to the distributee's "investment in the contract." Sec. 72(e)(2). Generally, however, the basis of an IRA is zero. Sec. 1.408- 4(a)(2), Income Tax Regs.; Costanza v. Commissioner, T.C. Memo. 1985-317. Petitioners admitted receipt of the $11,281 distribution from petitioner's Bank of America IRA in 1997 and reported the distribution on their return for that year, even though they failed to include the distribution in gross income. Petitioners do not qualify for the rollover exception provided in section 408(d)(3) because petitioners did not roll over any portion of the distribution into another IRA or other retirement account. Moreover, petitioners failed to show that they made any nondeductible or excess contributions to the IRA that would have increased their basis therein, and, thus, petitioners' tax basis in the IRA was zero. Patrick v. Commissioner, T.C. Memo. 1998- 30, affd. 181 F.3d 103 (6th Cir. 1999). Petitioners do not claim, and nothing in the record suggests, that petitioners should otherwise be given credit for any investment in the IRAPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011