Richard and Arline Muller - Page 4

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          deposits or additions to the IRA.  Pursuant to a request made by            
          petitioner on December 17, 2003, the IRA was closed and, taking             
          into account an interest penalty, petitioner received a                     
          $48,366.65 distribution from the IRA on that date (the IRA                  
          distribution).  The IRA distribution is evidenced by a Form 1099-           
          R, Distributions From Pensions, Annuities, Retirement or Profit-            
          Sharing Plans, IRAs, Insurance Contracts, etc., issued to                   
          petitioner by Commerce Bank.                                                
               Petitioner deposited $40,000 of the IRA distribution into a            
          regular time deposit account.  The disposition of the remaining             
          portion of the IRA distribution ($8,366.65) is not known, and               
          petitioners now agree that at least that amount should have been            
          included in the income reported on their 2003 return.2                      
               The income reported on petitioners’ timely filed 2003                  
          Federal income tax return, which was prepared by a paid income              
          tax return preparer, does not include any portion of the IRA                
          distribution, but it does include a different distribution, in a            
          much smaller amount, also evidenced by a Form 1099-R.                       
               In the notice of deficiency, respondent increased                      
          petitioners’ income by the amount of the IRA distribution.                  
          Respondent also imposed a section 6662(a) accuracy-related                  

               2 Petitioner mistakenly believed that he used a portion of             
          the IRA distribution to pay an outstanding Federal income tax               
          liability from 2000.  The record clearly demonstrates that the              
          payment he recalled was made in 2002, the year before the IRA               

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