In Fowler,(72) the Tax Court denied 10-year averaging for a taxpayer who received lump-sum distributions from his former employer's incentive savings plan and profit-sharing plan and chose to roll over part of the savings plan distribution.
He rolled over most of the incentive savings plan distribution into an IRA and claimed 10-year averaging for the profit-sharing distribution.
402(e)(4)(B), discussing the election of 10-year averaging, stated that "no amount which is not an annuity contract may be treated as a lump sum distribution .
The IRS argued the distributions therefore were taxable in the years received without the benefit of 10-year averaging.
Certain individuals who were 50 before 1986 also can elect 10-year averaging under transitional rules.
Under this proposal, persons eligible for these transition rules would be able to continue to elect five- and 10-year averaging
and capital gains treatment as under existing law.
This may include 10-year averaging
for a taxpayer born on or before Jan.
457 plan are not eligible for five- or 10-year averaging
Oddi initially favored the IRA, but his tax adviser (Ayco) advised selection of the lump-sum option that allowed 10-year averaging
and a 20% capital gains rate during a limited window ending Mar.