-20-
Norwest account is disqualified from being an IRA because it was
funded by an excess contribution. To the contrary, an IRA is not
necessarily disqualified by the fact that it accepted excess
contributions, even if it was funded entirely with excess
contributions. See Orzechowski v. Commissioner, 69 T.C. 750
(1978), affd. 592 F.2d 677 (2d Cir. 1979); see also Boggs v.
Commissioner, 83 T.C. 132 (1984), affd. 774 F.2d 740 (7th Cir.
1985); Benbow v. Commissioner, 82 T.C. 941 (1984). In another
context we concluded that excess contributions were not subject
to tax when distributed by an IRA. See Campbell v. Commissioner,
108 T.C. 54 (1997) (holding that the taxpayer received basis to
the extent of his “investment in the contract” under section
72(e)(6)). Petitioners have not made any such argument in this
case.
Respondent urges the Court to reject petitioner’s position.
Respondent asserts that “the record clearly reflects that the
position taken by petitioners on their 1998 return was correct”
and that a valid rollover of the distribution received from the
ESOP was made in that year. Furthermore, respondent points out
that petitioners’ 1998 return reported the receipt of the ESOP
distribution in the amount of $467,817 and reported that the
taxable amount of such distribution was “NONE”. Respondent
asserts that “petitioners are estopped, pursuant to the duty of
consistency doctrine, from adopting a position on their 1999 and
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