Mark A. Filer and Julie J. Filer - Page 3

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          be entered is not reviewable by any other court, and this opinion           
          should not be cited as authority.                                           
               Respondent determined a deficiency in petitioners’ Federal             
          income tax for the taxable year 2001 of $7,052 and an accuracy-             
          related penalty under section 6662(a) of $1,410.                            
               After concessions, the issues for decision are:2  (1)                  
          Whether a distribution received by petitioner Julie J. Filer as             
          the successor owner of her deceased mother-in-law’s annuity                 
          contract is includable in petitioners’ gross income.  We hold               
          that it is to the extent provided herein.  (2)  Whether                     
          petitioners are liable under section 6662(a) for an accuracy-               
          related penalty for substantial understatement of income tax.  We           
          hold that they are not.                                                     
          Background                                                                  
               Some of the facts have been stipulated, and they are so                
          found.  We incorporate by reference the parties’ stipulation of             
          facts, supplemental stipulation of facts, and accompanying                  
          exhibits.                                                                   
               At the time that the petition was filed, petitioners resided           
          in Orangevale, California.  (References to petitioners                      
          individually are to Mark or Julie.)                                         


               2  Petitioners concede:  (1) They received unreported                  
          interest income of $28, and (2) they are not entitled to an IRA             
          deduction.  Respondent concedes that petitioners are not liable             
          under sec. 72(t) for the additional tax on an early distribution            
          from a qualified retirement plan.                                           




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