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that, because you separated after your Thrift Savings
Plan (TSP) loan was issued, you must repay your loan in
full by 12/03/02, or a taxable distribution would be
declared. Because you forfeited your right to repay
the loan in full, effective 09/16/02, a taxable distri-
bution in the amount of $15,462.60 has been declared in
connection with the unpaid principal and unpaid inter-
est to 09/16/02, on * * * [petitioner’s $15,462.60]
loan.
Both September 23, 2002 letters further advised petitioner:
This amount [of taxable distribution declared] will be
reported as taxable income for 2002. You may also be
liable for a tax penalty on this amount due to an early
withdrawal. Because your Federal income tax liability
may be affected by this distribution and/or tax pen-
alty, you may wish to adjust your withholding amounts
accordingly. In certain circumstances, you can roll
all or any portion of an amount equal to this distribu-
tion over into an Individual Retirement Arrangement
(IRA) or other eligible plan and avoid current taxa-
tion. You should consult with your tax advisor con-
cerning taxation of this distribution.
You will be sent the appropriate tax form by January
31, 2003. The Internal Revenue Service will be sent a
notice of this distribution by February 28, 2003, as
required by law.
At no time after petitioner retired from the Postal Service
did he open an individual retirement account.
Petitioner filed Form 1040A, U.S. Individual Income Tax
Return, for his taxable year 2002 (petitioner’s 2002 return). In
that return, petitioner showed his occupation as “Retired” and
claimed (1) head of household filing status, (2) his two children
as dependents, and (3) the earned income tax credit. In peti-
tioner’s 2002 return, petitioner reported wages of $12,703.22,
“Pensions and annuities” of $33,118.49, of which he claimed only
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