                        T.C. Memo. 1996-42



                      UNITED STATES TAX COURT



                   JERRY SILVER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2057-94.        Filed February 6, 1996.



     Jerry Silver, pro se.

     Alan R. Peregoy, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WRIGHT, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax for taxable year 1989 in the

amount of $8,834.   Respondent further determined that petitioner

is liable for additions to tax pursuant to sections 6651(a)1 and

     1
      Unless otherwise indicated, all section references are to
                                                   (continued...)
                               - 2 -

6654(a) in the amounts of $1,666 and $434.08, respectively.

After concessions, the sole issue for decision is whether a

distribution to petitioner from a profit-sharing retirement plan

is fully includable in petitioner’s income for the taxable year

at issue.   We hold that such distribution is fully includable in

petitioner’s income for the taxable year at issue.

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein.   Petitioner resided in Baltimore, Maryland,

at the time the petition was filed in this case.

     Petitioner failed to file a timely Federal income tax return

for taxable year 1989.   Respondent issued a notice of deficiency

to petitioner dated November 8, 1993.    On April 25, 1994,

petitioner filed his 1989 Federal income tax return.

     At sometime during 1989, petitioner received a distribution

in the amount of $6,749 from a profit-sharing retirement plan

(Plan) maintained by his former employer, Jacob Goldfinger

(Goldfinger).   The Plan was a qualified plan under section

401(a).   Petitioner left the employ of Goldfinger in August 1987.

Petitioner testified that he was unaware of the Plan’s existence

while he was employed by Goldfinger.    At no time prior to the

     1
      (...continued)
the Internal Revenue Code in effect during the year at issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                                - 3 -

distribution did petitioner knowingly contribute, either directly

or indirectly, to the Plan.    Petitioner deposited the check

representing the distribution into his personal bank account on

July 3, 1989.   On July 14, 1989, petitioner mailed a check drawn

against his personal account to Goldfinger in the amount of

$3,474.71.   Goldfinger was the payee of this check, and he

subsequently deposited it into his personal bank account.     On his

return for 1989, petitioner reported the $6,749 as a nontaxable

IRA distribution.   Respondent determined that the entire amount

of the distribution constituted taxable income to petitioner.

                               OPINION

      As a general rule, respondent’s determinations are presumed

correct, and petitioner has the burden of proving otherwise.

Rule 142(a).

     There is no dispute as to whether petitioner received the

$6,749 distribution.   Petitioner contends, however, that the

$3,474.71 check constitutes his investment in the Plan.

Respondent, on the other hand, contends that petitioner sent the

check to Goldfinger pursuant to an agreement wholly unrelated to

the Plan, and that, under section 72(e)(6), petitioner has no

investment in the Plan.   We agree with respondent.

     Section 402 provides that amounts actually distributed from

a qualified plan are taxable to the distributee under section 72

in the year of distribution.    Sec. 402(a)(1).   The Plan in the

instant case is a qualified plan.    Sec. 401(a).   Section 72
                               - 4 -

relates to the taxation of annuities and certain proceeds of

endowment and life insurance contracts.     Section 72(e) is

applicable to amounts received under an annuity contract but

which are not received as an annuity.     The distribution received

by petitioner falls into this category.     Sec. 1.72-2(a)(1),

Income Tax Regs.   Under the general rule, amounts received before

the annuity starting date are included in income to the extent

such amounts are allocable to income on the contract, and not

included in income to the extent such amounts are allocable to

the investment in the contract.   Sec. 72(e)(2)(B).    Section

72(c)(4) defines the annuity starting date as the first day of

the first period for which an amount is received as an annuity

under the contract.

     The record indicates that the distribution petitioner

received in July 1989 was the first and only distribution that

petitioner received from the Plan.     The record also indicates

that the distribution at issue was not received as an annuity,

but rather as a lump-sum distribution of the balance of

petitioner’s account.   The record further indicates that the

distribution occurred prior to the annuity starting date.      Thus,

section 72(e)(2)(B) applies.   Under section 72(e)(2)(B), amounts

which are allocable to the investment in the contract will not be

included in income.   Section 72(e)(6) defines investment in the

contract as of any date as:
                               - 5 -

     SEC. 72(e)(6).   Investment in the contract.--* * *

           (A) the aggregate amount of premiums or other
     consideration paid for the contract before such date,
     minus

          (B) the aggregate amount received under the
     contract before such date, to the extent that such
     amount was excludable from gross income under this
     subtitle or prior income tax laws. [Emphasis added.]

The "date" referred to in this provision is the date of the

distribution.   Sec. 72(e)(8)(B).

     Petitioner’s testimony at trial concerning why he issued a

check to Goldfinger in the amount of $3,474.71 was confusing; his

credibility was also questionable.     In any event, it is quite

clear that petitioner paid Goldfinger after the date upon which

the distribution occurred.   Petitioner seems to argue that his

ignorance of both the law and the Plan’s existence should somehow

operate to pardon his delinquency in contributing to the Plan.

We cannot agree.   The mechanics of the Internal Revenue Code do

not permit such circumvention, and we are without the power to

effect a similar result.

     Accordingly, as the statute is clear, and as there is no

evidence that petitioner contributed any amount to the Plan prior

to the distribution, we find that petitioner did not have an

investment in the contract as defined in section 72(e).

Therefore, respondent’s determination as to this issue is

sustained.
                            - 6 -

To reflect the foregoing,

                                         Decision will be entered

                                    under Rule 155.
