Michael J. Barkley - Page 10

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          really contending is that he is entitled to deduct Mrs. Barkley’s           
          community property interest (equal to one-half of the 1998                  
          distribution) under section 402(d)(3) and (4)(E).  We shall                 
          assume, without deciding, that Mrs. Barkley had a community                 
          property interest in the 1998 distribution and direct our                   
          analysis to the operation of section 402(d)(3) and (4)(E).                  
               As in effect for 1998, section 402(d)7 affords more                    
          favorable tax treatment to a qualified recipient of a                       
          distribution that meets the definition of “lump sum distribution”           
          by enabling the recipient to elect to calculate a separate income           
          tax on the distribution, using the special tax computation                  
          authorized by section 402(d)(1)(B) (hereinafter referred to as              
          forward averaging).  Under section 402(d)(1)(B), a distribution             
          that qualifies as a lump-sum distribution eligible for forward              
          averaging is taxed as if it were paid over 5 years rather than in           
          a single taxable year.  If the taxpayer is eligible to elect and            
          elects forward averaging, section 402(d)(1)(A) imposes a separate           
          tax on the distribution, which is computed under section                    
          402(d)(1)(B) and is added to the income tax on the taxpayer’s               
          other income.  The separate tax under section 402(d) is equal to            
          five times the tax, computed using the rate for unmarried                   
          individuals, on one-fifth of the “total taxable amount of the               

               7Sec. 402(d) was repealed by the Small Business Job                    
          Protection Act of 1996, Pub. L. 104-188, sec. 1401, 110 Stat.               
          1787, for taxable years beginning after Dec. 31, 1999.                      

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