Lee E. Seidel - Page 3

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               Respondent determined a deficiency in petitioner’s Federal             
          income tax of $9,170 for taxable year 1999.  In the notice of               
          deficiency, respondent increased petitioner’s gross income by               
          $30,030 and reduced by $601 the miscellaneous itemized deductions           
          taken by petitioner.                                                        
               The issue for decision is whether petitioner is taxable on             
          one-half of the net distribution of $60,060 made from his                   
          California Water Service Company 401(k) plan pursuant to a                  
          marital settlement agreement dissolving his marriage to Laura               
          Seidel (Ms. Seidel).  Respondent’s computational adjustment of              
          $601 to petitioner’s claimed miscellaneous itemized deductions              
          will be resolved by our holding on the issue.                               
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the attached exhibits thereto are              
          incorporated herein by this reference.  Petitioner resided in               
          Yuba City, California, on the date the petition was filed in this           
               Petitioner married Ms. Seidel on October 23, 1993.  During             
          the marriage, petitioner was employed by the California Water               
          Service Company (CWSC).  Petitioner’s employment with CWSC                  
          commenced in 1974 and continued beyond the dissolution of the               
          marriage.  As an employee of CWSC, petitioner was a participant             
          in a tax-deferred savings plan (CWSC 401(k)) sponsored by CWSC              
          pursuant to section 401(a) and (k).  Petitioner’s participation             

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