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In January 1991, petitioner began participating in the
Thrift Savings Plan (TSP) for Federal employees. The TSP is a
defined contribution plan. Contributions to petitioner’s TSP
account were made by payroll deductions from his wages. The
amounts deducted were not included in his wage income for tax
purposes during the years he participated in the TSP plan. At
the time of his retirement petitioner had contributed
approximately $18,000 to his TSP account. On August 31, 1998,
petitioner’s TSP balance was $29,195. The difference between
$18,000 and $29,195 represents the increases in the value of
petitioner’s investments in his TSP account.
Beginning September 1, 1998, petitioner chose to receive
monthly payments of $400 from his TSP account. The amounts, less
withholding, were electronically deposited to petitioners’
checking account in America First Credit Union, Edison Branch, in
Ogden.
Petitioners filed a joint Federal income tax return for 2002
on which they reported taxable interest of $3,536.64, ordinary
dividend income of $264.84, TSP distribution income of $4,800,
pension and annuity income of $30,459.12, a capital loss of
$3,000, and total gross income of $36,060.65. On that return
petitioners claimed an IRA deduction of $3,500 in reporting their
adjusted gross income of $32,560.65. The claimed IRA deduction
was paid by transferring on March 30, 2003, $3,500 from
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