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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7Sec. 402(d) was repealed by the Small Business Job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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