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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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