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On Form 1099-R, Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts,
etc., for 2000 the city reported $19,619.74 as a distribution to
Mr. Molina.
In October 2001, Mr. and Mrs. Molina filed their 2000 joint
Federal income tax return. Among other things, on their 2000
return Mr. and Mrs. Molina reported (1) a $19,620 distribution
from the retirement plan, (2) $1,962 of tax on an early
distribution from a qualified pension plan, (3) a total income
tax liability of $12,801, and (4) a balance due of $5,777 after
subtracting their withholding. They did not remit any payment
with their 2000 return. Mr. and Mrs. Molina reported the $19,620
distribution on their 2000 return because they believed they were
obligated to report this amount after receiving the Form 1099-R.
On May 13, 2002, respondent received a Form 656, Offer in
Compromise (OIC), from Mr. and Mrs. Molina. Mr. and Mrs. Molina
attached a letter dated May 10, 2002 (May 2002 letter), to their
OIC. The May 2002 letter explained that the city’s reporting the
$19,620 distribution as income in 2000 represented a
“bureaucratic inconsistency” and there was doubt as to liability
for their 2000 tax year. Respondent did not process the OIC
because Mr. and Mrs. Molina left blank the space listing the
amount offered.
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Last modified: May 25, 2011