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the money, along with the IRA cash balance, for personal
expenses. Mr. Butler filed for bankruptcy in 2004, and
petitioner is currently pursuing a claim for the recovery of his
Allen’s Creek investment as one of Mr. Butler’s creditors.3
Petitioner does not dispute his ownership of the Allen’s Creek
note.
Prior to trial, petitioner agreed and stipulated that he
received and failed to roll over the distributed assets valued at
$96.83 and $2,471.23, representing the cash balance and the
OppenheimerFunds investment respectively. Petitioner disputes
the inclusion of the value of his Allen’s Creek note in income
and the imposition of the 10-percent additional tax.
Discussion
1. Tax Treatment on Distributions
Section 408(d)(1) provides that any amount paid or
distributed out of an IRA shall be included in gross income by
the distributee in the manner provided under section 72. Section
408(d)(3)(A) provides that section 408(d)(1) will not apply if
the entire amount received from an IRA distribution to the
individual for whose benefit the account is maintained is rolled
over into another IRA for the benefit of such individual no later
than 60 days after the receipt of the distribution.
3 Apparently petitioner also invested in another real
estate project with Mr. Butler. This investment was not an asset
of petitioner’s Sterling Trust IRA.
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Last modified: May 25, 2011