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report income relating to 2002.
Background
In 2002, petitioners received interest income from three
banks. In addition, on December 6, 2002, Ms. Birkey received
$40,433 from her Keogh account (i.e., a qualified retirement plan
for self-employed individuals). On that same day, Ms. Birkey
used those funds to purchase U.S. Savings Bonds. Petitioners, on
their 2002 joint Federal income tax return, did not include in
gross income the interest income and the distribution from the
Keogh account.
On January 24, 2005, respondent sent petitioners a notice of
deficiency relating to 2002. Respondent determined that
petitioners failed to report the interest income and the
distribution from the Keogh account. On April 5, 2005,
petitioners, while residing in Osage Beach, Missouri, filed their
petition with the Court.
Discussion
Pursuant to section 61(a)(4), interest income is included in
gross income. Pursuant to section 72, amounts distributed from a
Keogh account are included in gross income in the year of
receipt. See sec. 402(a). Petitioners contend that purchasing
U.S. Savings Bonds with the distribution from the Keogh account
is a “qualified rollover” (i.e., the distribution would not be
includable in their gross income). No such exception exists.
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Last modified: November 10, 2007