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defined in section 408(d)(3) because the time deposit account
to which the funds were deposited is not the type of account
described in that section.
Because petitioner had no investment in the contract in the
IRA, and no portion of the IRA distribution is excludable as a
rollover contribution, respondent’s determination that the entire
amount of the IRA distribution is includable in petitioners’ 2003
income is sustained.
In the notice of deficiency respondent imposed a section
6662(a) accuracy-related penalty. The $12,567 deficiency placed
in dispute in this case results entirely from petitioners’
failure to include the IRA distribution in the income reported on
their 2003 return. As relevant here and for purposes of the
imposition of the penalty, the underpayment of tax and the
understatement of income tax are computed in the same manner as,
and equal to, the deficiency. Cf. secs. 6211, 6662(d)(2),
6664(a).
According to respondent, the penalty is applicable because
the underpayment of tax is a substantial understatement of income
tax. See sec. 6662(b)(2), (d). Because the understatement of
income tax exceeds $5,000, it is a substantial understatement of
income tax within the meaning of section 6662(b)(2). See sec.
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Last modified: March 27, 2008