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A. Distribution From Plan 15104
Gross income means all income from whatever source derived,
including income from pensions. Sec. 61(a)(11). However,
distributions of after-tax employee contributions from a pension
plan constitute a nontaxable return of capital. See Lange v.
Commissioner, T.C. Memo. 2005-176.
The Plan 15104 Form W-2 reflects a gross distribution to
petitioner from Plan 15104 of $372,850 and that petitioner made
no employee contributions to Plan 15104. The parties stipulated
the accuracy of the Plan 15104 Form W-2, and no evidence in the
record contradicts the Plan 15104 Form W-2. This evidence, if
not rebutted, is sufficient for respondent to meet his burden of
proving that petitioner received a distribution of $372,850 from
Plan 15104 and that no employee contributions were made to Plan
15104. The burden shifts to petitioners to come forward with
evidence that all or a portion of that distribution is not
included in their gross income.
On their tax return, petitioners reported the distribution
of $372,850 from Plan 15104, but they asserted that only $192,850
of that amount was taxable. In the information accompanying
petitioners’ second Form 1040X, petitioners further reduced the
amount they reported as taxable to $132,674. Petitioners’ theory
is that the distribution contained after-tax employee
contributions, and thus only a portion of the distribution was
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