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INFORMATION NEEDED
Our records show that you issued a Form 1099-R to the
Social Security Number (SSN) * * * for the tax year
ending December 31, 2003 to Mary Dyer in the amount of
$ 18,171. Can you please verify the correctness of
this amount? Can you please provide a copy of the
check issued to Mary Dyer for this amount? This
pertains to Policy Number * * * [the policy at issue].
In another letter to petitioners dated May 23, 2007,
respondent stated as follows:
Dear Mr. and Mrs. Dyer
We have been notified that the United States Tax
Court has docketed this case. It is to our mutual
benefit to settle the case without a trial. This
pertains to the tax year ending December 31, 2003.
This case is scheduled for trial in Tampa, Florida on
October 1, 2007.
The Statutory Notice of Deficiency (SND) dated
July 10, 2006 proposed an increase to taxable income
for the failure to report the following income on your
tax return:
Taxable annuity income issued in the Social
Security Number (SSN) of Mrs. Dyer from the
Northwestern Mutual Life Insurance Company in the
amount of $ 18,171. * * *
Information received from Northwestern Mutual Life
Insurance Company regarding Policy Number * * *
indicates this policy lapsed and the taxable amount was
$ 18,171.23. I have enclosed a copy of this
information. Per Internal Revenue Code Section 72, if
a loan is still outstanding when the life insurance
policy is surrendered or allowed to lapse, the borrowed
amount becomes taxable at the time to the extent the
loan value exceeds the owner’s basis in the contract,
as if the borrowed amount was actually received at the
time of surrender or lapse and used to pay off the
loan. * * * Please secure a corrected written
statement from them that would verify the corrected
taxable income regarding this policy for tax year 2003.
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Last modified: March 27, 2008