Lee E. Seidel - Page 9

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               Although Ms. Seidel reported one-half of the net                       
          distribution of $60,060, or $30,030 in gross income on her 1999             
          Federal income tax return, she claimed the entire credit of                 
          $15,400 for the Federal income tax withheld on the $77,000                  
          distribution from petitioner’s CWSC 401(k) plan, together with an           
          itemized deduction on Schedule A of $1,540 for the State and                
          local income taxes withheld on the $77,000 distribution.                    
               Petitioner did not report any part of the distribution from            
          the CWSC 401(k) plan on his Form 1040, U.S. Individual Income Tax           
          Return, for taxable year 1999.                                              
               Following the examination by the Internal Revenue Service              
          (IRS) of petitioner’s and Ms. Seidel’s 1999 Federal income tax              
          returns, petitioner took the position that Ms. Seidel should                
          include the full amount of the distribution of $77,000 in her               
          income for 1999, and Ms. Seidel took the position that petitioner           
          should include one-half of the distribution in his income.  As a            
          result, respondent issued notices of deficiency to both                     
          petitioner and Ms. Seidel to avoid the possibility of being in a            
          whipsaw position.  Respondent determined that petitioner failed             
          to report $30,030 (one-half of the net distribution) in his                 
          income for 1999, and Ms. Seidel was responsible for additional              
          income in the amount of $46,970.  Ms. Seidel filed a petition to            
          this Court at docket No. 8964-03, in which she contested her                
          liability as to the additional one-half of the net distribution,            

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