Anthony J. and Denise D. Sadberry - Page 11

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          53 but instead wrote in the space:  “See note attached.”  Two               
          pages of handwritten notes were attached to the return.  The                
          first page referenced line 53 and stated:  “The required 10% IRS            
          withholding was made as to Glenbrook Life & Annuity-–see Form               
          1099-R attached.”  The second page referenced the Trust and                 
          stated:  “See attached Form 1099-R for Southern Farm Bureau Life            
          Insurance Company–10% IRS withholding occurred-–These funds were            
          placed in the Trust and/or were used for the Trust purposes.”               
          Petitioner believed he was following the instructions to Form               
          1040 in not listing the taxable portions of the distributions as            
          income on line 16 (IRA distributions) and the 10-percent tax for            
          early distributions on line 53 (tax on IRAs, etc.).  He believed            
          that the attached notes would satisfy those two lines on the                
          return.  He believed that placing a portion of the proceeds from            
          the Southern Farm Bureau distribution into a trust constituted a            
          rollover, and that, if he were in error in that assumption, the             
          IRS would correct it.                                                       
               On April 25, 2000, petitioner signed a notarized personal              
          financial statement for 1999, which he filed with the Texas                 
          Ethics Commission as required of him as a member of the Texas               
          Lottery Commission.  He listed on that report the Southern Farm             
          Bureau and Glenbrook distributions, including the gross and                 
          taxable portions of the distributions.                                      







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