Juanita Doby - Page 7

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          qualified employer retirement plans.  See also sec. 402(a).                 
          Section 72(a) reiterates the general rule of inclusion in gross             
          income, unless otherwise provided.  Section 72(b),3 however,                
          provides that portions of annuity payments may be excludable from           
          income.  The excludable portion of a payment generally is that              
          portion which bears the same ratio to such payment as the                   
          “investment in the contract” bears to the expected return under             
          the contract, determined at the time the annuity payments begin.            
          Sec. 72(b)(1).  While the term “investment in the contract” is              
          defined generally as “the aggregate amount of premiums or other             
          consideration paid for the contract”, sec. 72(c)(1)(A),                     
          contributions made by an employer on behalf of an employee-                 
          taxpayer which were not includable in the taxpayer’s gross income           
          generally are not part of the taxpayer’s investment in the                  
          contract, sec. 72(f).                                                       
               In 2000, petitioner received $3,146 in survivor annuity                
          payments from the “General Retirement Plan for Employees of                 

          3SEC. 72. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE                 
                         INSURANCE CONTRACTS.                                         
                         *    *    *    *    *    *    *                              
                    (b) Exclusion Ratio.--                                            
                         (1) In general.--Gross income does not include               
                    that part of any amount received as an annuity under an           
                    annuity, endowment, or life insurance contract which              
                    bears the same ratio to such amount as the investment             
                    in the contract (as of the annuity starting date) bears           
                    to the expected return under the contract (as of such             
                    date).                                                            





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