Anthony V. and Sandy K. Margavio - Page 4

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          discrepancy between the amount of $31,267 shown on the 1998 Form            
          1099-R and the amount of $31,266 shown on the notice of                     
          deficiency to be de minimis.                                                
               Petitioner contends that the restrictions of section 72 did            
          not apply to him.  He asserts that he “wanted to test the                   
          envelope.”  Petitioner said he’s “heard of people trying it and             
          some getting away with it.”  He also contends he is entitled,               
          based on his retirement contributions, to a greater tax-free                
          portion of the 1998 pension annuity distribution.                           
               In general, the determinations of the Commissioner in a                
          notice of deficiency are presumed correct, and the burden is on             
          the taxpayer to show that the determinations are incorrect.  Rule           
          142(a); Welch v. Helvering, 290 U.S. 111 (1933).  Petitioner does           
          not argue the applicability of section 7491(a), and the record              
          reflects that section 7491(a) does not apply.                               
               Gross income generally includes income from whatever source            
          derived, including income from pensions and annuities. Sec.                 
          61(a)(9), (11); sec. 72(a).  Section 72 provides in general that            
          amounts received under an annuity contract are includable in                
          gross income except to the extent that such amounts are                     
          considered to be a return of consideration paid.  Specifically,             
          section 72(a) provides that unless otherwise provided, gross                
          income includes any amount received as an annuity.                          
               Section 72(b), however, provides that a portion of the                 
          annuity will be excluded from gross income.  In particular, gross           





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