William H. and Sandra G. Flank - Page 4

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          participant in an employer-sponsored retirement plan through her            
          employment with Pace University.                                            
               In May of 2002, petitioner contributed $3,500 into an                  
          existing “classic” IRA with Teachers Insurance and Annuity                  
          Association - College Retirement Equities Fund (TIAA-CREF).  In             
          December of 2002, petitioner elected to convert his classic IRA             
          into a Roth IRA.  As a result, petitioner received a distribution           
          of $10,487.86 (distribution) from the classic IRA which he                  
          deposited into a Roth IRA with TIAA-CREF.                                   
               Petitioners received from TIAA-CREF a Form 1099-R,                     
          Distributions From Pensions, Annuities, Retirement or Profit-               
          Sharing Plans, IRAs, Insurance Contracts, etc., for 2002,                   
          indicating that the distribution resulted in a taxable amount of            
          $10,487.86.  Petitioners included that amount as income on their            
          return.                                                                     
               Petitioners also received for 2002 a Schedule K-1, Partner’s           
          Share of Income, Credits, Deductions, etc., from Oxford                     
          Residential Properties, LLP, which showed that petitioners had              
          interest income of $6.28 and real estate income of $130.68 from             
          the partnership.  Petitioners did not include these income items            
          on their return.                                                            







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