James J. Milner and Marilyn R. Milner - Page 3

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               Petitioner then requested and received from the plan a total           
          distribution of the balance in his account in the amount of                 
          $55,555.  At the time of the plan distribution, petitioner was 53           
          years old.                                                                  
               Petitioner did not roll over the $55,555 proceeds of the               
          distribution into an individual retirement account or into                  
          another qualified retirement plan.  Petitioners used                        
          approximately $15,000 to $20,000 from the plan distribution in              
          order to complete the remodeling of their home.                             
               Later in 1999, petitioners sold their home for approximately           
          $199,000.  At the time of this sale, petitioners apparently owed            
          approximately $188,000 on a home mortgage.  After selling their             
          home, petitioners purchased another home for a purchase price of            
          approximately $132,000.                                                     
               Sometime in 1999, petitioner Marilyn R. Milner had a heart             
          attack and thereafter was unable to work.  In January of 2001,              
          petitioner Marilyn R. Milner applied for Social Security                    
          disability benefits relating to the heart attack.  Her                      
          application, at the time of trial, was still pending.                       
               On March 21, 2000, petitioners timely filed their 1999 joint           
          Federal income tax return on which they reported as taxable                 
          income the $55,555 distribution that petitioner received from the           
          plan but on which petitioners did not report a 10-percent                   








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