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distributions was $37,477.26, and that the nontaxable portion was
$945.24.
Petitioner filed an individual Federal income tax return for
1999. On this return, petitioner reported total pension and
annuity distributions of $37,477.26, and he reported that the
taxable portion of the distributions was $34,599.02. In the
statutory notice of deficiency, respondent determined that the
information reported on the Form 1099-R was correct.
Petitioner does not dispute receiving distributions of
$38,422.50 from TSERS during the year in issue. Petitioner
argues that respondent’s calculation of the taxable portion of
these distributions is in error.
Gross income generally includes all income from whatever
source derived, including pensions and annuities. Sec. 61(a)(9),
(11); sec. 72(a). However, portions of annuity payments may be
excludable from income under section 72(b). The excludable
portion of a payment generally is that portion which bears the
same ratio to such payment as the “investment in the contract”
bears to the expected return under the contract, determined at
the time the annuity payments begin. Sec. 72(b)(1). While the
term “investment in the contract” is defined generally as “the
aggregate amount of premiums or other consideration paid for the
contract”, sec. 72(c)(1)(A), contributions made by an employer on
behalf of an employee-taxpayer which were not includable in the
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