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for the seven funds. Petitioner reduced that figure to 29
percent to allow for a “margin of error”. He used 5-year rates
of return, where available, even when a fund had been in
existence longer because, as he stated: “I figured a five-year
return was reasonable for my purposes, you know, simply because
the markets change considerably over time.”
Petitioner began making monthly withdrawals out of his
qualified accounts based on these calculations. He received
distributions of $50,000 in 1995, $80,000 in 1996, and $82,000 in
1997. Petitioner admitted that the 1997 distribution of $82,000
was in error, and he corrected that error by reducing his
distribution to $78,000 the following year, which year is not
before the Court. In subsequent years, petitioner resumed his
scheduled periodic distributions of $80,000 per year.
On their Federal income tax returns for 1995, 1996, and
1997, petitioners reported the periodic distributions as income.
The deemed distribution of $17,125 in 1995 was also reported as
income on their 1995 return. Respondent thereafter determined
that the distributions were subject to the 10-percent additional
tax under section 72(t).
Petitioner contends that the additional tax is not owed
because the distributions were “part of a series of substantially
equally periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the employee or the
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