Nick Allan Palermino - Page 5

                                        - 4 -                                         
          the distribution is received before retirement, only amounts                
          allocable to the “investment in the contract” are excludable from           
          gross income.  Sec. 72(e)(2)(B), (8)(A).                                    
               The employee’s “investment in the contract” includes amounts           
          contributed by the employer, “but only to the extent that * * *             
          such amounts were includible in the gross income of the                     
          employee”.  Sec. 72(f).  For purposes of a section 401(k) plan,             
          “elective contributions * * * are neither includible in an                  
          employee’s gross income at the time the cash or other taxable               
          amounts would have been includible in the employee’s gross income           
          (but for the * * * [section 401(k) plan]), nor at the time the              
          elective contributions are contributed to the plan.”  Sec.                  
          1.401(k)-1(a)(4)(iii), Income Tax Regs.; see also sec. 1.402(a)-            
          1(d)(2), Income Tax Regs.                                                   
               Petitioner’s entire balance in the retirement plan                     
          constituted elective contributions, and the distribution from               
          petitioner’s retirement plan occurred before his separation from            
          service, death, or disability and before he reached the age of              
          59�.  As a result, the contributions were not included in                   
          petitioner’s gross income at the time of contribution, and                  
          petitioner has no “investment in the contract” which may be                 
          excluded from his gross income.  In short, petitioner contributed           
          to the retirement plan a portion of his salary that was not taxed           
          at the time of contribution; the retirement plan cannot later               






Page:  Previous  1  2  3  4  5  6  Next

Last modified: May 25, 2011