Nick Allan Palermino - Page 3

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          1998 Federal income tax.  The issue is whether a distribution               
          from petitioner’s retirement plan is includable in petitioner’s             
          gross income.2  Petitioner resided in San Diego, California, at             
          the time the petition was filed.                                            
                                     Background                                       
               From 1992 to 1999, petitioner was employed as a buyer for              
          Smith & Nephew, Inc.  Smith & Nephew established a retirement               
          plan for its employees, which the parties stipulate qualifies as            
          a section 401(k) plan.  Fidelity Investments Institutional                  
          Operations Co., Inc. (Fidelity), provided administrative record-            
          keeping services for petitioner’s retirement plan.  Between 1993            
          and 1996, petitioner contributed elective tax-deferred amounts--            
          specifically, $5,520 in matched contributions and $1,692 in                 
          unmatched contributions.                                                    
               On May 15, 1998, respondent served a levy on Fidelity for              
          unpaid taxes and statutory additions of $5,582.03 for the taxable           
          year 1996 and sent petitioner a “Taxpayer’s Copy of Notice of               
          Levy”.  Fidelity complied with the levy and distributed $5,582.03           
          from petitioner’s retirement plan to respondent on June 19, 1998.           


          2   Respondent did not assess the 10-percent addition to tax for            
          early withdrawals from qualified retirement plans.  See sec.                
          72(t)(1) and (2)(A).  For distributions made on account of a levy           
          under sec. 6331 before Dec. 31, 1999, the Commissioner acquiesced           
          following this Court’s decision in Murillo v. Commissioner, T.C.            
          Memo. 1998-13, affd. without published opinion 166 F.3d 1201 (2d            
          Cir. 1998), and no longer assesses the 10-percent addition to tax           
          under sec. 72(t).  See also Larotonda v. Commissioner, 89 T.C.              
          287 (1987).                                                                 




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