- 2 - 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.Page: Previous 1 2 3 4 NextLast modified: November 10, 2007