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On December 1, 2003, respondent mailed to petitioner’s last
known address a statutory notice of deficiency with respect to
petitioner’s 2001 tax year. Respondent determined that a
deficiency resulted from petitioner’s failure to include the
amount of the check in gross income for 2001. In addition to the
regular tax liability, respondent determined that a 10-percent
additional tax applied to the amount of the check pursuant to
section 72(t). Petitioner timely filed a petition with this
Court for a redetermination of the deficiency.
Discussion
Respondent contends that the distribution of the original
check by SouthTrust Bank constituted an IRA distribution and,
consequently, the amount of the original check must be included
in petitioner’s gross income in the year of receipt. Petitioner
concedes that he initiated closure of the IRA account and
received the original check from SouthTrust Bank in 2001.
However, petitioner contends that, because he did not endorse or
negotiate the original check, the account remained open
throughout 2001. Relying on articles 3 and 4 of the Uniform
Commercial Code as adopted by Georgia and related caselaw,
petitioner contends that the original check and the underlying
funds remained the property of SouthTrust Bank during the year in
issue, and, consequently, the receipt of the original check did
not constitute the receipt of taxable income by petitioner. The
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Last modified: May 25, 2011