Reinaldo & Ernestina Moracen - Page 4




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          totaling $415,266.  Of that amount, $414,130 represented proceeds           
          from the annuity contract, while $1,136 represented interest that           
          accrued before the proceeds were distributed.  At Mr. Falcon’s              
          behest, each check was deposited into a joint bank account in the           
          names of petitioner and Ms. Becquer.  Petitioner and Ms. Becquer            
          had signature authority over the joint account.2  In August 2003,           
          petitioner wrote a check from the account to her father in the              
          amount of $415,000.                                                         
               In 2004, Travelers issued petitioner a Form 1099-R,                    
          Distributions from Pensions, Annuities, Retirement or Profit-               
          Sharing Plans, IRAs, Insurance Contracts, etc., listing a gross             
          distribution of $414,130 and a taxable amount of $53,886.                   
          Travelers also issued petitioner a Form 1099-INT, Interest                  
          Income, listing taxable interest income of $1,136.  Petitioners             
          did not report any portion of the annuity proceeds or interest              
          income on their joint 2003 tax return.                                      
               Respondent issued petitioners a notice of deficiency in                
          August 2005.  Respondent determined that petitioners must include           
          in gross income $53,885 of the annuity proceeds and $1,136 of               
          interest income.  Respondent also determined an accuracy-related            




               2 Ms. Becquer separately received and deposited into the               
          joint account proceeds from Mrs. Knight’s annuity contract.                 
          Those proceeds are not at issue in this case.                               






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