Thomas and Sarah G. Ackerman - Page 2

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                                  FINDINGS OF FACT                                    
               The parties have stipulated most of the relevant facts,                
          which we incorporate herein by this reference.  When they filed             
          their petition, petitioners resided in Teaneck, New Jersey.                 
               Mr. Ackerman was previously employed in the New York office            
          of Rudolf Wolff & Co., Inc. (employer).  Mr. Ackerman                       
          participated in employer’s nonqualified executive deferred                  
          compensation plan (plan).  Pursuant to the plan’s governing                 
          document, any plan payments to employees were to be made “net of            
          applicable taxes, including wage withholding taxes.”                        
               On or about June 30, 2000, employer’s businesses were sold             
          to another entity.  Mr. Ackerman was among a few employees                  
          retained temporarily to assist in wrapping up business in the New           
          York office.  In return, he was entitled to receive a $120,000              
          “redundancy payment”, payable on termination.                               
               Mr. Ackerman’s 2001 Form W-2, Wage and Tax Statement (W-2),            
          from employer shows taxable wages, tips, and other compensation             
          totaling $331,915.99, representing the $120,000 “redundancy                 
          payment” and a $211,296 plan distribution.  The W-2 shows only              
          $500 of Federal income tax withheld.  Employer is no longer in              
          business; petitioners have no contact address for employer’s                
          successor or for any custodian of employee records.                         
               On their 2001 joint Form 1040, U.S. Individual Income Tax              
          Return (Form 1040), petitioners included in gross income “Wages,            

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