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Gross income includes all income from whatever source
derived. Sec. 61(a). Section 61(b) specifically includes items
included under section 72 (relating to annuities).
Petitioner does not dispute that he received the money from
Martin’s plan in 1998. Petitioner instead argues that the
transfer of Martin’s plan into the Inherited IRA should not be
characterized as a taxable distribution of Martin’s plan, but
rather a tax exempt “trustee-to-trustee” transfer.
The law is clear. Section 402(a) generally provides that
any amount actually distributed to any distributee by any
employees’ trust, such as Martin’s plan, shall be taxable to the
distributee in the taxable year of the distributee in which
distributed, under section 72. Section 402(c) provides that
certain amounts paid to an employee from a qualified trust are
considered “rollover” distributions, and thus excludable from
income. Under section 402(c)(5), a transfer from a qualified
plan to an eligible retirement plan, including an individual
retirement account described in section 408(a) or individual
retirement annuity described in section 408(b), shall be treated
as a rollover contribution described in section 408(d)(3).
However, section 408(d)(3)(C) specifically denies the rollover
2(...continued)
production under sec. 7491(c) because the record shows that
petitioner failed to include the income on his return. Higbee v.
Commissioner, 116 T.C. 438 (2001).
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Last modified: May 25, 2011