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Background
At the time the petition was filed, petitioners resided in
Moraga, California. Petitioner Richard Elder is an attorney
admitted to practice before the Tax Court. Petitioner Eva Elder
is not an attorney.
In 2003, petitioners received distributions totaling $6,621
from Roth individual retirement accounts (Roth IRAs).2
Petitioners used the proceeds for first-time homebuyer expenses.
Petitioners did not report the distributions as taxable income on
their joint 2003 Federal income tax return.
The Roth IRAs were held through E Trade Clearing LLC (E
Trade). Forms 1099-R, Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts,
etc., issued by E Trade list “J” as the distribution code.
According to the instructions for the Form 1099-R for 2003,
distribution code J indicates:
a distribution from a Roth IRA where * * * there are no
known exceptions. For example, you may not know
whether an exception under section 72(t) applies (such
as medical expenses, first-time homebuyer, etc.) or
whether the distribution is a qualified distribution
2 In general, contributions to a traditional individual
retirement account (IRA) are deductible when made, but
distributions from the IRA are subject to tax. See Orzechowki v.
Commissioner, 69 T.C. 750, 755 (1978), affd. 592 F.2d 677 (2d
Cir. 1979). In contrast, contributions to a Roth IRA are not
deductible, but qualified distributions generally are not subject
to tax. Sec. 408A(c)(1), (d). We discuss the taxation of Roth
IRA distributions in greater detail below.
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Last modified: November 10, 2007