T.C. Mem o. 2 01 6- 28

UNITED STAT ES TAX COURT
RAYMOND S. MCGAUGH, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 13 66 5- 14 . Fi le d F eb ru ary 24 , 20 16 .
P h ada se lf- di rect edIRA o f whi chM was th e cu st od ia n a nd whi ch he ldst oc k i n c or

po rat io n X. P reque st edth atM p ur ch as e ad di ti on al st oc k i n X fo r th e IRA. Alt ho ug h t he in ve st m en t i n X was no t a p ro hi bi te d i nv es tm en t fo r th e IRA, M re fu se d t o p ur ch as e th e st oc k d ire ct ly. At P’s reque stM is su eda wire tra ns fer d ire ct ly to X; an d m or e th an60 da y s t he reaf te r, X inturnis su edth e st oc k i n t he na m e o f P’s IRA. M re po rte d t he tra ns act io n t o the IRS b ecau se M ha d d et erm in edth atth e wir e tr an sf er was a di strib ut io n t o P no t fo ll owe d b y

a ro ll ov er i nv es tm en t wi th in th e p eri odpe rm it te d und er I.R.C. s ec. 4 08 (d )(3 ). R co ns eque nt ly det erm in edth atth ere was a di st rib ut io n fr om

th e IRA t o P an d ade fic ie nc y inP’s in co m e ta x fo r th e 2 01 1 t ax ab le y ear. Held : Th ere was no di st rib ut io n fr om th e IRA t o P .-2
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[* 2] Eric C. Onyang o, fo r pe ti ti on er. Mi ch ael C. Danc z an d Kat hryn E. Kel ly, fo r res po nd en t.

MEMORANDUM OPINION GUSTAFSON, Ju dg e: The In te rn al Rev enue Serv ic e (“ IRS” ) is su edto pe ti ti on er, Raym on d S . McGau gh , a st atut ory no ti ce o f de fic ie nc y

pu rs ua ntto se ct io n 6 21 2 on Marc h 1 7, 2 01 4, fo r Mr. M cGau gh ’s 20 11 Fed eral in co m e ta x.

1 Inth e n ot ic e th e IRS de te rm in eda de fic ie nc y intax of $ 13 ,53 8 a ris in g fr om a di st rib ut io n fr om

Mr. Mc Gau gh ’s in di vi du al ret ire m en t ac co un t (“ IRA”) an d a n accu racy-rela te d p en al ty of $2 ,70 8 u nd er s ect io n 6 66 2( a). The m at te r is curren tl y be fo re the Co urt o n M r. McGau gh ’s m ot io n fo r su m m ary jud gm en t p ur su an t t o Ru le 12 1, wh ic h t he Co m mis si on er h as op po se d. The is su e fo r de ci si on is whet he r a tran sa ct io n i nv ol vi ng th e rem ov al of $5 0,0 00 fro m

Mr. Mc Gau gh ’s IRA to pu rch as e st oc k fo r hi s IRA con st itut eda di st rib ut io n t ha t was no t ro ll edov er wi th in th e 6 0- da y pe rio d a ll owe d i n s ect io n

Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1 Rev enue Co de (26 U.S.C.; “ th e Co de ”), as am en de d, an d a ll Ru le refe ren ces are t o th e Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. All am ou nt s ar e ro un de d t o t he ne ares t d ol la r.-3
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[* 3] 40 8( d) (3 ) an d i s t hu s t ax ab le in co m e. Fo r th e rea so ns st at edbe lo w, we will gr an t s umm ary jud gm en t i n M r. McGau gh ’s fav or . Bac kg ro un d The fact s s etforth be lo w are b as edon th e p le ad in gs an d o th er p ert in en t m at eri al s i n t he reco rdan d a re n otindi sp ut e. See R ul e 1 21 (b ). Mr. Mc Gau gh ’s pe ti ti on all eg es anad dr es s i n Il li no is
. Si nc e 2 00 2 M r. McGau ghha s m ai nt ai ne d asel f-d ire ct edIRA wit h cu st od ia n M erri ll Ly

nc h, an d t he IRA h el d 1 0,0 00 sh ares of s to ckinFir stPers on al Fi na nc ia l Co rp . (“ FPFC ”). The Co m m is si on er as se rts , andwe as su m e, th at Mr. Mc Gau gh is a m em

be r of th e b oa rdof d ire ct or s o f FPFC , bu t the Co m m is si on er h as no t d en ie d tha t FP FC s to ckis pe rm it te d t o b e anass etinth e IRA. Inth e su m

m er o f 20 11 , Mr. Mc Gau gh reque st edth atMerr il l Lync h u se fu nd s fr om

hi s IRA to pu rch as e anad di ti on al 7,5 00 sh ares of F PFC s to ck
. Howev er, fo r rea so ns th e rec or d d oe s n otsh ow, Me rri ll Ly nc h wo ul d n otpu rch as e th e sh ares di rect ly on M r. McGau gh ’s beh al f. Co ns eque nt ly, Mr. Mc Gau gh reque st edth atMerr il l Lync h i ni ti at e a wir e tra ns fer o f $5 0,0 00 di rect ly to FP FC. On Oct ob er 7 , 20 11 , Merr il l Lync h i ni ti at ed an d F PFC re cei ve d the wire tra ns fer. (Th ere i s n o e vi de nc e th atMr. Mc Gau gh reque st edanIRA d is tri bu ti on to hi m se lf.) On No ve m be r 28 , 20 11 , FPFC i ss ue d-4
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[* 4] th e st oc k c ert ifi cat e n otinMr. Mc Gau gh ’s nam e b utin st eadinth e n am e o f

“ Raym on d M cGau gh IRA FBO Ra ym on d M cGau gh ”, as Mr. Mc Gau gh ha d reque st ed . FPFC cl ai m s t ha t the st oc k c ert ifi cat e was m ai le d t o M erri ll Ly nc h o n orab ou t the same day

as the Nov em

be r 28 , 20 11 , is su an ce d at e o n t he cert ifi cat e; bu t b ecau se Merr il l Lync h s ta te s t ha t the st oc k c ert ifi cat e was no t re cei ve d u nt il

“ earl y 20 12 ”, we tr eatth e ti m in g o f th e tr an sm it ta l o f th e st oc k c ert ifi cat e to Merril l Lync h a s b ei ng indi sp ut e an d a ss um e itwas i n 2 01 2. Th erea fte r Merril l Ly nc h a tt em pt edto m ai l the st oc k c ert ifi cat e to Mr. Mc Gau gh , bu t i t was returne d by the po st al servi ce atlea sttwi ce. The reco rddo es no t s ho w wher e th e o rig in al st oc k c ert ifi cat e is curren tl y lo cat ed ; b utwe as su m e (as th e IRS ass ert s) th at Mr. Mc Gau gh ho ld s i t (a n a ss ert io n h e d en ie s)
. 2 Fo r pu rp os es of M r. McGau gh ’s m ot io n, we as su m e th atMerr il l Lync h rece iv edth e st oc k c ert ifi cat e fro m FPFC m or e th an60 day s af te r th e wir e tr an sf

er, whi chMerr il l Lync h t he refo re re ck on edto be ou ts id e th e 6 0- day li mit at io n p eri od
The st oc k c ert ifi cat e ev id en tl y rem ai ns inli m

bo . Mr. McGaug h i ns is ts th at 2 Merril l Lync h i s o bl ig edto ho ldth e st oc k a s an ass etof t he IRA, bu t M erri ll Ly nc h d en ie s t ha t i t p os se ss es th e st oc k c ert ifi cat e. Inearl y 20 15 FPFC st at ed th at , bef or e itco ul d i ss ue a rep la cem en t ce rti fic at e, itwou ldne ed“ a lo stcert ifi cat e affi da vi t wi th a ho ldharm le ss fro m Merr il l Lync h * * * si nc e th atis th e p arty th at we is su edth e o rig in al cert ifi cat e to ”. The year atis su e is 20 11 , andwe do no t ad dr es s t he tax effe ct s, i f an y , of t he lat er d eal in gs am on g M r. McGau gh , FPFC, an d M erri ll Ly

nc h.-5 -

[* 5] fora qu al ifi edrol lo ve r tr an sa ct io n u nd er s ect io n 4 08 (d )(3 ). Bel ie vi ng th e tra ns act io n t o b e subjec t t o t he rol lo ve r ru le s, an d b el ie vi ng th e tr an sf er t o b e ou ts id e th e 6 0- da y

li m it , Merr il l Lync h re po rte d t he $5 0,0 00 trans act io n a s a ta xabl e d is tri bu ti on on Fo rm 10 99 -R, “ Dis tri bu ti on s Fr om Pen si on s, An nu it ie s, Ret ire m en t o r Pro fit -Sh ari ng Pla ns , IRAs, In su ran ce Co nt ract s, et c.” an d re fu se s t o tre atth e FPFC st oc k a s an ass etof t he IRA. Mr. Mc Gau gh co nt inue s t o o bjec t t o th e ref us al
. The IRS d et erm in edth atth e wir e tr an sf er i ss ue d b y

Merr il l Lync h co ns ti tu te d a“ di st rib ut io n” fro m Mr. Mc Gau gh ’s IRA an d was in cl ud ib le ingro ss in co m e und er s ect io ns 40 8( d) an d 7 2 a ndth at , bec au se he ha d n oty etreac he d ag e 5 9- 1/ 2, i t was an“ earl y di st rib ut io n” subjec t t o t he 10 % ad di ti on al tax of se ct io n 7 2( t). Th e IRS is su eda no ti ce o f de fic ie nc y forth e 2 01 1 t ax y ear de te rm in in g a$1 3,5 38 de fic ie nc y intax as we ll as a n a ccu racy-rela te d p en al ty of $2 ,70 8. Mr . McGau gh ti m el y fil edhi s p et it io n o n J un e 1 1, 2 01 4, s eek in g red et erm in at io n o f th e li ab il ity an d fi le d am ot io n fo r su m m ary jud gm en t o n M ay 26 , 20 15 , to whi ch th e Co m m is si on er res po nd ed
. 3 The Co m m is si on er fi le d ares po ns e o n J un e 2 4, 2 01 5, an d asupp le m en ta l 3 res po ns e o n S ep te m

be r 8, 2 01 5. Atth e Co m

mis si on er’s reque st , th is cas e was cal le d a t the Co urt’s s es si oninCh ic ag o, Il li no is , onOcto be r 19 , 20 15 , so th ata subp oe nath atth e Co m

m is si on er h adis su edto Merr il l Lync h c ou ldbe en fo rced
. (co nt in ue d...)-6
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[* 6] Dis cu ss io n I. St an dardforsu m

m ary jud gm en t Und er Ru le 12 1 (t he Tax C ou rt’s a na lo g t o R ul e 5 6 o f th e Fed eral Ru le s o f Ci vi l Pr oc edur e), the Co urt m ay gra ntsu m

m ary jud gm en t wh ere the re i s n o ge nu in e d is pu te as t o a ny m at eri al factan d ade ci si on m ay be ren de redas am at te r of law. Th e m ov in g p arty

(he re, Mr . McGau gh ) be ars th e b ur de n o f sh owi ng th at no ge nu in e d is pu te of m at eri al factex is ts , andth e Co urt wi ll vi ew an y factua l
m at eri al an d i nf

eren ces inth e li gh t m os t fa vo rab le to th e n on -m ov in g p arty . Dah ls tro m

v. Co m m is si on er, 8 5 T.C. 8 12 , 82 1 (1 98 5) ; cf . And ers on v. Lib erty Lob by, Inc., 4 77 U.S. 24 2, 2 55 (19 86 ) (s am e st an da rdun de r Fed . R. Civ . P. 56 ).

“ The op po si ng pa rty is t o b e aff or de d t he be ne fitof a ll reas on ab le do ub t, an d a ny in fere nc e to be dra wn fr om th e und erl y in g fa ct s co nt ai ne d i n t he reco rdm us t b e vi ewedina li gh t m os t fa vo rab le to th e p arty op po si ng th e m ot io n fo r su m m ary jud gm en t.” Es pi no za v . Comm is si on er, 7 8 T.C. 4 12 , 41 6 (1 98 2) . Sin ce we co ns id er Mr . McGau gh ’s m ot io n fo r su m m ary jud gm en t, we draw al l i nf eren ces in (...co nt inue d) 3 Att orne y s fo r Merril l Ly

nc h p ro du ceddo cu m en ts to th e Co m m is si on er an d ap pe aredat t he cal en da r cal l. The Co m m is si on er’s co un se l s ta te d t ha t s he wou ld rev ie w th e d oc um en ts an d d is cu ss th em with M erri ll Ly

nc h’s at to rn ey s. In th e m on th s t ha t h av e el ap se d s in ce the n, the Co m m is si on er h as no t fi le d any mot io n t o co m pe l n orfil edan y

furth er re sp on se to Mr. Mc Gau gh ’s m ot io n fo r su m m ary jud gm en t.-7 -

[* 7] fav orof t he Co m

m is si on er. Tha t i s, we as su m e th e fac ts as s ho wn b y th e Co m m is si on er, the no n- m ov in g p arty , or a s s ho wn b y Mr. Mc Gau gh an d n ot di sp ut edby the Co m

m is si on er. II. Gen eral IRA p rin ci pl es As we p rev io us ly exp la in edinPeekv. Co m m is si on er, 1 40 T.C. 21 6, 2 22
- 22 3 (2 01 3) : A tax pa y er wh o i nv es ts hi s m on ey inth e h op e o f m ak in g aga in ov er a p eri odof years --wh ethe r to fun d h is ret ire m en t o r fo r an y ot he r pu rp os e--n orm al ly m

us t p ay tax on th atga in as h e rea li zes it . Sec. 10 01 (a), (c ). His pa ym en t o f th e ta x fr om ti m e to ti m e d im in is he s t he si ze o f hi s i nv es tm en t an d t he reb y , to so m e ex te nt , di m in is he s h is fu tu re g ai ns . Howev er, a t ax pa y er m ay crea te an“ in di vi du al ret ire m en t ac co un t” , whi chis ex em ptfro m tax un de r se ct io n 40 8( e)(1 ) an d i n wh ic h h is in ve st m en t ca n t he refo re i nc reas e unt il hi s ret ire m en t wi th ou t b ei ng di m in is he d b y in co m e ta x l iabi li ty. As l on g as th e acc ou ntqu al ifi es as a n IRA, th e ta xp ay er-i nv es to r is no t l iabl e fo r in co m e ta x o n t he ga in s, s o t ha t the un di m in is he d i nv es tm en t acco un t ca n e arnm ax im

um returns un ti l the ti m e co m es forpa y ou t, whe n t he tax pa y er wi ll fin al ly owe in co m e ta x o n t ho se gre at er g ai ns . Und er s ect io n 4 08 , th e b en efi t o f th e tr ad it io na l IRA is th us de ferr al of in co m e ta x l iabi li ty on re ti rem en t i nv es tm en t g ai ns . * * * Gen eral ly, un de r se ct io n 7 2, am ou nt s d is tri bu te d t o t he tax pay er fro m anIRA are in cl ud ib le inth e ta xp ay er’s g ro ss in co m e, se e se c. 40 8( d) (1 ), an d t ho se am ou nt s are s ub ject t o a“ 10 -Per cen t Ad di ti on al Tax” if t he tax pay er h as no t yet “ at ta in [ed ] ag e 5 9- 1/ 2” , see sec . 72 (t)
.-8
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[* 8] The IRA m

us t b e a tru stor acu st od ia l ac co un t, admin is te redby a tru st ee o r cu st od ia n (h ere, M erri ll Ly nc h) who act s as a fi du ci ary fo r th atIRA. Sec. 4 08 (a), (h ); 2 6 C .F.R. se c. 1.4 08 -2 (a), (d ), In co m e Tax Reg s. Th e fi du ci ary is res po ns ib le fo r th e in ve st m en t an d d is po si ti on of t he pro pe rty hel d i n t he IRA. 26 C.F.R. s ec. 1.4 08 -2 (e). An am ou ntwil l n otbe tre at edas atax ab le di strib ut io n fr om anIRA if

itis a qu al ifi edrol lo ve r. Sec. 4 08 (d )(3 ). A di st rib ut io n i s co ns id ereda qu al ifi ed ro ll ov er co nt rib ut io n i f th e en ti re am ou ntanin di vi du al rece iv es is pa idin to a qu al ifyin g IRA or o th er el ig ib le ret ire m en t p lan wi th in 60 da y s o f th e d is tri bu ti on . Id .; s ee al so Sch oo f v. C omm is si on er, 1 10 T.C. 1, 7 (19 98 ). Bec au se th e IRA p ai d o ut$5 0,0 00 (to FPFC ) atMr. Mc Gau gh ’s reque stan d fo r hi s u lt im at e b en efi t, an d b ecau se (as we as su m e fo r pu rp os es of t he pe nd in g m ot io n) th atam ou ntwas n otrep ai d t o t he IRA (i n t he form of t he FPFC st oc k) un ti l af te r th e 6 0- da y

rol lo ve r pe rio d, M erri ll Ly nc h a ndth e IRS tre at edth e tra ns act io n a s a t ax ab le di strib ut io n. III. The oc cu rren ce o f a d is tri bu ti on A. The re was no li te ral di st rib ut io n o f IRA fu nd s t o M r. McGau gh
. Sect io n 4 08 (d )(1 ) pr ov id es th at“ any am ou ntpa idor d is tri bu te d o utof a n in di vi du al ret ire m en t p la n s ha ll be in cl ud edingro ss in co m e b y th e p ay ee o r-9
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[* 9] di st rib ut ee”. Con st ru in g t he fact s i n t he Co m m is si on er’s fav or , th e ev id en ce 4 sh ows th atMerr il l Lync h wi redm on ey to FPFC forwhi chFPFC is su edsh ares to th e IRA. No c as h, ch eck , or wi re tran sf er ev er p as se d t hr ou gh Mr. Mc Gau gh ’s ha nd s, an d h e was th eref

or e n ota li te ral “pa y ee o r di st rib ut ee” o f an y am ou nt . B. Mr. Mc Gau gh was, atm os t, a co ndui t o f th e IRA fu nd s. The Co m m is si on er ev id en tl y

reck on s t ha t the for eg oi ng acco un t i s anov ersi m pl ifi edde sc rip ti on of t he tra ns act io n, s in ce M erri ll Ly nc h d ecl in edto m ak e a di rectpu rch as e an d i ns te adsi m pl y wire d fu nd s atMr. Mc Gau gh ’s in st ru ct io n, thu s arg uabl y pu tt in g the fun ds at M r. McGau gh ’s di sc ret io n. Bu t i f we ad op t thi s pe rs pe ct iv e o n t he tra ns act io n a ndackno wled ge Mr. Mc Gau gh as t he di rect orof th e tr an sa ct io n, the ou tc om e d oe s n otch an ge . The o wne r of anIRA is en ti tl edto di rectth e in ve st m en t o f th e fu nd s wi th ou t fo rfei ti ng th e ta x b en efi ts of a n IRA. Eve n a ckno wled gi ng th atMr. Mc Gau gh pu ll edall th e st rin gs , itrem ai ns tru e th at th e fu nd s t he IRA rel eas edwentst rai gh t t o t he in ve st m en t an d re su lt edinth e st oc k s ha res ’ be in g i ss ue d s tra ig htto th e IRA. The reg ul at io ns elabo rat e sl ig ht ly by pro vi di ng th at“ an y

am ou ntactua ll y 4 pa idor d is tri bu te d o r de em edpa idor d is tri bu te d * * * sh al l b e in cl ud edinth e gr os s i nc om e o f th e p ay ee o r di st rib ut ee”, 2 6 C .F.R. se c. 1.4 08 -4 (a)( 1) , Inc om e Tax Reg s. (e m

ph as is ad de d) ; b utitap pe ars th ata “ de em eddi st rib ut io n” oc cu rs whe n an IRA ceas es to qu al ify becaus e o f a p ro hi bi te d t ran sa ct io n o r whe re the ta xp ay er u se s t he IRA’s as se ts as c ol la te ral fora lo an , id . par a. (d ). Thu s, the reg ul at io ns sh edno li gh t o n t he is su e in th is cas e.-1 0-

[* 10 ] If we an al y ze the si tu at io n fo r po ss ib le “ co ns tru ct iv e rec ei pt ” o f th e fu nd s fro m Merr il l Lync h b y

Mr. Mc Gau gh (an d c on st ru ct iv e tr an sf er o f th e fu nd s b y hi m to FPFC ), th e o ut co m e st il l d oe s n otch an ge . “ It i s wel l es tabl is he d t ha t the
m ere r ecei ptan d p os se ss io n o f m on ey do es no t b y

it se lf c on st itut e g ro ss in co m e.” Lid dy v. Co m

m is si on er, T.C. Mem o. 1 98 5- 10 7, af f’d, 80 8 F .2d31 2 (4 th Cir
. 19 86 ). “ W e acc ep t as so un d l aw th e ru le th ata ta xp ay er n eedno t treatas i nc om e m on ey s wh ic h h e d idno t re cei ve un de r a cl ai m of r ig ht , whi chwere n othi s t o ke ep , andwhi ch he was re qu ire d t o t ran sm itto so m eo ne els e as a m ere c on du it .” Diam on d v . Commis si on er, 5 6 T.C. 5 30 , 54 1 (1 97 1) , aff’d, 4 92 F.2d28 6 (7 th Cir
. 19 74 ). Thu s, m on ey

rece iv edas am ere a ge ntor c on du itis no t i nc lu di bl e in gro ss in co m e. Lid dy v. Co m

m is si on er, 8 08 F.2dat 3 14 ; Di am on d v . Commis si on er, 56 T.C. at 5 41 . W e h av e h el d tha t thi s p rin ci pl e m ay ap pl y inth e cas e o f a ta xp ay er an d a n IRA, see Anci ra v . Comm is si on er, 1 19 T.C. 13 5, 1 38 (20 02 ); a nd th e IRS so ackno wled ge s. The que st io n a t i ss ue he re i s wh ethe r, in th e wir e 5 As the Co m

m is si on er s ta te s i n h is supp le m en ta l o pp os it io n (a t 7 -8 ) to th e 5 m ot io n fo r su m

m ary jud gm en t, “ if M erri ll Ly nc h, as cu st od ian o f pe ti ti on er’s IRA, pu rch as edth e sh ares with fu nd s fr om pe ti ti on er’s IRA, ei th er thr ou ghpe ti ti on er as anag en t/ co ndui t o r ot he rwis e, th enth ere m ay no t h av e b een a di st rib ut io n. Se e Anc irav. Co m

m is si on er, 1 19 T.C. 13 5, 1 37 -4 0 (2 00 2) (th e wit hd rawal of f un ds fro m anIRA d idno t g iv e ri se to a di st rib ut io n, wh ere the withd rawal was i n t he (co nt in ue d...)-1 1-

[* 11 ] tra ns fer a ndsubs eque ntst oc k p ur ch as e, Mr. M cGau ghact edas aco ndui t t o oranag en t o f th e IRA fi du ci ary an d c us to di an , Merr il l Ly nc h. Neit he r th e Co de no r th e ap pl ic ab le reg ul at io ns pro vi de sp eci fic gu id an ce on whet he r orwhenanam ou ntis co ns id eredto ha ve be en“pa idor d is tri bu te d o ut of anin di vi du al ret ire m en t p lan” th ro ug h the us e o f th e b en efi ci ary as a co ndui t fro m th e cu st od ia n t o t he in ve st m en t. Thi s C ou rt h as , ho wev er, ad dr es se d acas e in vo lv in g fa ct s s im il ar t o M r. McGau gh ’s: InAnci ra v . Comm is si on er, 1 19 T.C. at13 6, the tax pa y er m ai nt ai ne d asel f-d ire ct edIRA, an d dur in g t he y ear a t i ss ue he reque st edth athi s IRA cus to di anpu rch as e a p art ic ul ar co m pa ny’ s s to ckforhi s IRA. Whi le th e is su in g c om pa ny’ s s to ckwas ape rm is si bl e as se t tha t co ul d b e he ldby the IRA, co m

pa ny po li cy

of t he cu st od ia n o f th e acc ou ntdi d n otpe rm itit to di rect ly pur ch as e st oc k t ha t was no t p ub li cl y tra de d. Id . The t ax pa y er the refo re reque st eda ch eckm ad e p ay ab le to th e n on -p ub li c is su in g c om pa ny, andth e cu st od ia n s en t the tax pa y er the reque st edch eck . Id. The tax pa y er fo rward edth e ch eckto th e is su in g c om

pa ny, andth e is su in g c om pa ny iss ue d t he st oc k cert ifi cat e. Id . at 1 36 -1 37 . The ce rti fic at e st at edth atth e ta xp ay er’s IRA was th e own er o f th e sh ares of t he st oc k, an d t he tax pay er p res um edth atth e is su in g (...co nt inue d) 5 fo rm of ach eckth atco ul d n otbe ne go ti at edby the acco un t o wne r, an d the fun ds were u se d b y

th e IRA cu st od ia n t o a cqui re s to ck ).”-1 2-

[* 12 ] co m

pany hadsen t the st oc k c ert ifi cat e to th e IRA cu st od ia n a s i ns tru ct ed
. Id . at 1 37 . Howev er, fo r un sp eci fie d re as on s t he cert ifi cat e was no t d el iv eredto th e cu st od ia n, an d t he tax pa y er d idno t d is co ve r th e m is ta ke un ti l af te r rec ei vi ng a no ti ce o f de fic ie nc y

fro m th e IRS . Id. Aft er l earn in g o f th e err or , th e ta xp ay er di rect edth e is su in g c om

pa ny to s en d the st oc k c ert ifi cat e to hi m , andhe th en de li ve reditdi rect ly to the cu st od ia n. Id
. InAnci ra we h el d t ha t n o d is tri bu ti onfro m th e IRA t o t he tax pa y er o ccu rred whe n the cu st od ia n d el iv eredth e ch eckto hi m . Id. at13 9. We ob se rv edth atno di st rib ut io n wo ul d h av e o ccu rredif t he cu st od ia n h adeit he r pu rch as edst oc k di rect ly from

th e is su in g c om

pa ny or s en t a c he ckto a br ok er wh o t he n p ur ch as ed th e st oc k fo r th e IRA. Id . at 1 37 -1 38 . W e h el d t ha t the tax pa y er ac te d a s an ag en t orco ndui t fo r th e cu st od ia n b ecau se th e ta xp ay er arran ge d the pu rch as e b utwas no t i n c on st ru ct iv e rec ei ptof t he ch eckan d t he own ers hi p o f th e st oc k was di rect ly as su m edby the IRA. Id . at 1 38 . Mor eo ve r, we de te rm in edth atth e d el ay of t he de li ve ry of t he st oc k c ert ifi cat e to th e cu st od ian was a bo ok ke ep in g e rro r, whi ch

“ di d n otalt er the own ers hi p o f th e st oc k b y th e IRA an d c ert ai nl y

di d n ottra ns fer th e o wne rs hi p t o * * * [th e ta xp ay er].” Id. at14 0. Lik e th e ta xp ay er i n An ci ra, Mr . McGau gh wis he d t o a cqui re fo r hi s IRA st oc k t ha t ap pa ren tl y

co ul d n otbe pu rch as eddi rect ly by th e cu st od ian, M erri ll-1 3-

[* 13 ] Ly nc h. Mr . McGau gh th eref or e arra ng edth e p ur ch as e o f FPFC st oc k, in st ru ct edMerr il l Lync h t o m ak e th e wir e tr an sf er t o F PFC, an d i ns tru ct edFPFC to de li ve r th e certi fic at e d ire ct ly to M erri ll Ly nc h. Mo reo ve r, un li ke th e ta xp ay er in Anci ra, wh o re cei ve d ach eckfro m th e IRA an d d el iv ereditto th e is su in g co m pa ny, Mr. McGau gh ne ve r pe rs on al ly han dl edan y ch eckby whi chth e IRA fu nd s wer e tr an sm it te d t o F PFC. In st ead , he r eque st edth atMerr il l Lync h t ran sf er th e fu nd s v iawire tra ns fer d ire ct ly to the is su in g c om pa ny, andth attra ns fer was du ly m ad e wit ho utMr. Mc Gau gh ’s in te rp os it io n. An d u nl ik e th e st oc k i n An ci ra, th e FPFC st oc k c ert ifi cat e was sen t d ire ct ly to the cu st od ia n. The Co m m is si on er em

ph as iz es th at“ [i]t ap pe ars th atpe ti ti on er i s i n po ss es si on of t he pu rp orte d s to ckcert ifi cat e.” Eve n i f Mr. M cGau gh ha d p hysic al po ss es si on of t he st oc k c ert ifi cat e, he was n otinco ns tru ct iv e rec ei ptof the ass et . The “ es se nc e [o f co ns tru ct iv e rec ei pt ] is th atfun ds whi chare s ub ject t o a ta xp ay er’s u nf

et te redco m

m an d a ndwhi chhe is free to en joy at h is op ti on are co ns tru ct iv el y

rece iv edby him

whet he r he see s fi t t o e njo y th em or n ot .” Anci ra v. Co m m is si on er, 1 19 T.C. at 1 38 (qu ot in g Es ta te of B ro ok s v . Commis si on er, 5 0 T.C. 58 5, 5 92 (19 68 )). Here, the st oc k was is su edno t i n M r. McGau gh ’s nam e bu t i n t he na m e “ Raym on d M cGau gh IRA FBO Raym on d M cGau gh ”. Even with ph y si cal po ss es si onof t he st oc k c ert ifi cat e, Mr. M cGau gh co ul d n otha ve real iz ed-1 4-

[* 14 ] an y pra ct ic al ut il it y

or b en efi t fr om

th e certi fic at e in th e n am e o f th e IRA. (An d i f Merril l Ly

nc h’s at te m

pt s t o m ai l the IRA’s st oc k c ert ifi cat es to Mr. Mc Gau gh in“ earl y

20 12 ” (co nt rary to h is in st ru ct io ns an d i nt en ti on ) ga ve hi m own ers hi p o f th e sh ares , th enth atwas adi st in ct20 12 trans act io n t ha t wo ul d n ot affe cthi s 2 01 1 i nc om e ta x l iabi li ty.) W e are no t p ers ua de d b y

th e Co m m is si on er’s arg um en t tha t M r. McGau gh ’s ci rcu m st an ces are s im il ar t o tha t o f th e ta xp ay er i n Dab ne y v. Co m m is si on er, T.C. Mem o. 2 01 4- 10 8. In Dabn ey th is Co urt fo un d atax ab le di strib ut io n fr om th e ta xp ay er’s IRA wh enth e ta xp ay er ex pl ic it ly requ es te d a n IRA di st rib ut io n (t o hi m se lf) with t he go al of p ur ch as in g l an d fo r hi s IRA bu t fa il edto return t he di st rib ut io n (o r an y

othe r pr op erty ) to th e acc ou ntwithi n t he 60 -d ay rol lo ve r pe rio d o f se ct io n 4 08 (d )(3 ). Id. at*5 . The p ol ic ie s o f th e cu st od ia n, Ch arl es Sch wab , di d n otpe rm itreal pro pe rty to b e anass etof i ts IRAs , id . at * 4, * 11 , so in Mar ch20 09 Mr. Dab ne y

reque st eda di st rib ut io n o f hi s IRA fun ds an d atra ns fer of th os e fu nd s t o t he ti tl e co m pa ny han dl in g the pro pe rty sal e. Co nt rary to Sch wab ’s po li ci es , Mr. Dab ne y di rect edth e co m

pa ny to i ss ue ti tl e in th e n am e o f th e IRA, b utitfai le d t o d o s o a ndpu t the pro pe rty in h is na m e. He tri edto sel l the pr op erty an d fi na ll y

su ccee de d i n J anua ry

20 11 an d wi redth e p ro ceed s t o S ch wab-1 5-

[* 15 ] as apu rp orte d “ ro ll ov er co nt rib ut io n” . W e h el d tha t the tra ns fer o f th e fu nd s fro m th e IRA t o M r. Dab ne y

co ns ti tu te d atax ab le di st rib ut io n. Here, b y co nt ras t, Me rri ll Ly

nc h p rev io us ly perm it te d F PFC s to ckas an as se t t o b e h el d i n M r. McGau gh ’s IRA, an d i ts subs eque ntco rres po nd en ce s eem s to in di cat e th atif t he st oc k a t i ss ue ha d b eenrece iv edwithi n t he 60 -d ay pe rio d, i t wou ldha ve be enacce pt ed . Andhe re the st oc k c ert ifi cat e b ears th e n am e o f th e IRA as it s o wne r; a nditis th eref or e n otli ke th e rea l p ro pe rty in Dabn ey th at , for
m or e th ana y ear, was ti tl edinth e n am e o f th e in di vi du al tax pa y er. Mr. Dab ne y reque st eda di st rib ut io n i n o rd er t o c on du cta real est at e tr an sa ct io n n otpe rm it te d by the IRA, whe reas Mr. Mc Gau gh di rect edth e IRA t o m ak e a p erm is si bl e in ve st m en t. Thi s ca se is no t l ik e Dab ne y . Rat he r, th is cas e res em

bl es Anci ra. W e h ol d t ha t M r. McGau gh di d n ot rece iv e a d is tri bu ti on when Merr il l Ly nc h m ad e th e wir e tr an sf

er t o F PFC; an d t o th e ex te ntth athe ha d c on tro l o ve r th e wir edfun ds , he a t m os t ac te d a s a c on du it fo r th e IRA cu st od ian. Co ns eque nt ly, th e 6 0- da y li mit at io n o n arol lo ve r un de r se ct io n 4 08 (d )(3 ) do es no t re al ly com e in to pl ay inth is cas e. The t im in g o f th e m ai li ng of t he sh ares (i.e ., m or e th an60 da y s af te r th e wir e tr an sf

er) d oe s n otalt er ou r co nc lu si on th atth ere was no di st rib ut io n fr om th e IRA t o M r. McGau gh . W e wil l the refo re g ran t M r. McGau gh ’s m ot io n fo r su m m ary jud gm en t.-1 6-

[* 16 ] To re fle ctth e fo reg oi ng , An ap pr op ria te ord er an d d eci si on wil l b e en te red
.