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ESOP, as required by section 402(c)(3). We discuss the basis for
petitioners’ assertion that Mr. Kopty failed to make a valid
rollover in more detail below.
Based on the factual premise that Mr. Kopty failed to make a
valid rollover, petitioners contend that Mr. Kopty’s account at
Norwest was not an IRA within the meaning of section 408(a) and
they are not subject to tax on the distributions from that
account. Furthermore, petitioners argue that the determination
made by respondent in the notice of deficiency is based upon
Norwest’s incorrect conclusion that Mr. Kopty had made a valid
rollover of his J.D. Edwards & Co. stock in 1998. They argue
that, because Norwest’s conclusion was wrong, the notice of
deficiency, based thereon, must also be wrong. According to
petitioners:
respondents [sic] relied on the erroneous bank
determination that the 1998 roll over of the ESOP to
the IRA account * * * was valid and relied on the
erroneous reporting that followed that determination by
the bank. * * * Hence, respondent’s determination in
paragraph 3 [of the notice of deficiency] and
consequently the deficiency notice is null and void.
Petitioners do not explain the legal basis, or cite any
authority, for their conclusion that they are not subject to tax
on the distributions from Mr. Kopty’s account at Norwest. The
general rule is that any amount "paid or distributed out of" an
IRA is subject to tax as prescribed by section 72. See sec.
408(d)(1). Petitioners seem to be arguing that Mr. Kopty’s
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