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Petitioner Respondent
1. Total distributions received in 1999 $37,477.26 $38,422.50
2. Cost in the plan (i.e., investment in the contract) 57,665.65 18,905.42
4. Cost divided by 240 month recovery period (monthly exclusion) 240.27 78.77
5. Multiplied by 12 (yearly exclusion) 2,883.24 945.24
9. Taxable distributions received in 1999 (line 1 minus line 5) 34,594.02 37,477.26
There are two points of contention between petitioner and
respondent--the amounts reflected on lines 1 and 2. The
remaining lines in the calculation are computational and are
based upon the first two amounts.
First, petitioner in his calculation used total
distributions (line 1) of $37,477.26, rather than the $38,422.50
used by respondent. Petitioner has agreed that the latter amount
represents the total distributions he received in 1999, thus
respondent’s use of this amount in his calculation is correct.
Second, petitioner used a total cost in the plan, or
investment in the contract (line 2), of $57,665.65. The amount
used by petitioner represents the total contributions petitioner
made to the plan, using both taxed and untaxed funds. However, a
taxpayer’s investment in a contract generally includes only the
amount of after-tax contributions and does not include pre-tax
contributions. Sec. 72(f). Thus, the amount of $18,905.42 used
by respondent--the amount representing only those contributions
which were made using previously taxed funds--is the correct
amount.
2(...continued)
the law. Dixon v. United States, 381 U.S. 68 (1965); Automobile
Club v. Commissioner, 353 U.S. 180 (1957).
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Last modified: May 25, 2011