- 7 - Respondent determined that petitioner did not use a reasonable rate of interest in calculating the amortizable growth of his qualified plan accounts. Respondent also contends that, even if the interest growth rate used was reasonable, the $82,000 distribution in one year impermissibly modified a series of payments that were required to be substantially equal in order to escape the additional tax. The fixed amortization method utilized by petitioner requires that a taxpayer use a reasonable rate of interest in calculating a schedule of substantially equal payments. Respondent argued that petitioner’s rate of interest of 29 percent was not reasonable because of three “fallacies”, summarized as follows: Petitioner miscalculated the average annual return of the seven funds,7 high short-term returns cannot be sustained over a longer period, and past performance is not predictive of future performance. Rejecting petitioner’s methodology, respondent recalculated the average annual returns of the seven funds used by petitioner. Respondent determined 6(...continued) agreement of the parties. 7 Respondent argued that, by taking the cumulative return of each fund and dividing it by the relevant number of years to arrive at an average annual return, petitioner ignored the effects of compounding and overstated each fund’s rate of return.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011