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taxpayer’s gross income generally are not part of the taxpayer’s
investment in the contract, sec. 72(f). Therefore, in the
context of this case, a taxpayer’s investment in a contract
includes only the amount of “after-tax contributions” and does
not include any “pre-tax contributions”.
On his 1999 return, petitioner elected to use the section
72(b) “safe harbor” provisions provided in Notice 88-118, 1988-2
C.B. 450, which were to be used for certain annuity payments made
from section 401(a) qualified plans, section 403(a) employee
annuities, and section 403(b) annuity contracts.1 Neither party
questions the applicability of these safe harbor provisions to
the case at hand; the dispute centers solely on the calculation
made thereunder. As discussed below, the sole remaining issue is
the proper amount of petitioner’s investment in the contract.
For purposes of illustration, the following are summaries of
the calculations made by petitioner and respondent pursuant to
the applicable worksheet provided by the Internal Revenue Service
(the relevant line numbers of the worksheet are indicated):2
1Similar provisions were codified in sec. 72(d). This
subsection does not apply to the case at hand because it is
inapplicable to annuities which started prior to November 19,
1996. Small Business Job Protection Act of 1996, Pub. L. 104-
188, sec. 1403(b), 110 Stat. 1791.
2Although we use these worksheets to illustrate the dispute
in this case, we note that the IRS guidance exists merely to
assist taxpayers in filing tax returns; neither the Commissioner
nor this Court is bound by such guidance where it is contrary to
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