Richard Edwin and Eva Ruth Elder - Page 4




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          indicated that if basis information was not necessary, they could           
          provide the Forms 8606 sooner.                                              
               Respondent did not receive the Forms 8606 from petitioners             
          and issued a notice of deficiency in January 2006 determining a             
          deficiency of $2,681 in petitioners’ joint income tax for 2003.             
          Respondent determined that the Roth IRA distributions were                  
          includable in gross income and asserted a 10-percent early                  
          withdrawal penalty.                                                         
               In a letter dated April 1, 2006, petitioners enclosed Forms            
          8606 indicating that no portion of the Roth IRA distributions was           
          taxable.  The letter states that petitioners used the Roth IRA              
          distributions for qualified first-time homebuyer expenses.  The             
          letter also states that petitioners had been attempting to                  
          complete the Forms 8606 for some time but had been unable to                
          obtain basis information.  Petitioners wrote in part that                   
          “figuring out what [they] spent on stocks [they] bought as far              
          back as 1996 has been difficult to impossible.”                             
               The petition herein was filed on April 14, 2006.                       
          Petitioners’ case was assigned to an Appeals officer on May 16,             
          2006.  After reviewing the file and performing research, the                
          Appeals officer concluded on May 18, 2006, that the notice of               
          deficiency was correct because a distribution from a Roth IRA               
          could not qualify for the first-time homebuyer expense exception.           








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