Michael P. Schwab and Kathryn J. Kleinman v. Commissioner

OPINION

Holmes, Judge:

When a company winds up an employee-benefit plan and distributes its assets, section 402(b) 1 says an employee receiving his share of those assets has to pay tax on “the amount actually distributed.” Michael Schwab and his wife Kathryn Kleinman both received life-insurance policies as their share of an employee-benefit plan that was ending. They argue that surrender charges on both the policies made them worth nothing at the time of their receipt. The Commissioner argues that we must consider only what the insurance company calculated to be the policies’ “stated values”…