(petitioners, married couple, participated in trust arrangement known as "multiple-employer welfare-benefit fund - a non-qualified employee-benefit plan that would allow petitioners to obtain life insurance on tax deductible basis; plan adopted in 2001 and trust funded with multi-million dollar life insurance policies and petitioners paid the initial premiums; petitioners were advised that if plan was allowed to terminate, they would be taxed on net cash surrender value of policies; policies had large death benefits, had surrender charges that exceeded their stated values (e.g., no cash received on surrender) and petitioner's wife allowed her policy to lapse; IRS had designated such plans as "listed transactions" in 2000 and issued regulations in 2002 further attacking them; plan's administrator terminated plan in 2003 and life insurance policies distributed to petitioners at time when flexible-premiums policies were not paid up; petitioners did not include stated policy values ($48,667 for husband and $32,576 for wife) in income; IRS asserted deficiency in accordance with Treas. Reg. Sec. 1.402(b)-1(c) and I.R.C. Sec. 402(b) that the full amount of $81,243 (stated policy values combined) should have been reported into income; issue before court was proper valuation of the two variable life insurance policies; court concluded that values to be based on guaranteed cost of insurance to time of termination of first policy and until second policy's premium paid; deficiency ultimately less than $5,000; on appeal court affirmed; court noted that I.R.C. §§ 419 and 419A limit employer's deductions for contributions to such plans to amount based on cost of benefits provided during year plus additional amount for reserves, and that under I.R.C. Sec. 402(b)(2) amount actually distributed or made available to distributee is taxed to distributee in tax year of distribution or year made available; "amount actually distributed" under I.R.C. Sec. 402(b)(2) means FMV of actual distribution - surrender charges must be considered when determined policy's FMV; total deficiency attributable to both policies was $2,665.95 - the amount "actually distributed" under I.R.C. Sec. 402(b) and includible under I.R.C. Sec. 72).