Lee E. Seidel - Page 8

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          over into any other qualified plan within the 60-day grace period           
          allowed by section 402(c).1                                                 
               On August 27, 1999, Ms. Seidel signed cashier’s checks as              
               Check No.           Payee                    Amount                    
               2016074195          Lee Seidel               $10,000.00                
               2016074191          First Community                                    
                                   Financial Services      1$24,159.66                
               2016074192          First Community                                    
                                   Financial Services       1$6,847.46                
               1These check payments made to First Community Financial                
          Services were made to pay off the principal balance of a second             
          mortgage on petitioner’s house, which was a liability assumed               
          during petitioner and Ms. Seidel’s marriage, and as such was a              
          joint liability, and to pay off another unspecified joint                   
               However, Ms. Seidel reported only $30,030 of the $77,000               
          pension distribution on her 1999 Federal income tax return.  This           
          amount represents one-half of the net distribution from                     
          petitioner’s CWSC 401(k) plan.  In the notice of deficiency                 
          mailed to Ms. Seidel respondent determined that she failed to               
          report the additional $46,970 distribution from New York Life               
          from petitioner’s CWSC 401(k) plan.                                         

          1Although a qualified pension plan is exempt from taxation                  
          under sec. 501(a), any amounts actually distributed from such a             
          plan generally must be included in the distributee’s gross                  
          income.  Sec. 402(a).  In order to avoid the tax consequence of a           
          plan distribution, the distributee may “roll over” the amount of            
          the distribution into another eligible plan within 60 days.  Sec.           

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