10
Petitioner does not argue that he falls within the scope of
any of the above exceptions. With respect to the distribution of
$16,831.81, however, petitioner argues that Fidelity withheld the
10-percent penalty prior to distributing the balance of the
account to him. As noted above, petitioner confuses the penalty
for premature distribution with the penalty for early withdrawal
and the tax imposed on a distribution by section 402(a). The
distribution of $16,831.81 stems from a lump sum distribution
from a qualified plan and a tax-free rollover into a qualified
IRA. Because the distribution does not fall within the scope of
any of the exceptions under section 72(t), petitioner is liable
for the penalty imposed thereunder.
The transcript identified above indicates that the payments
of $464 and $580 were reported to the Internal Revenue Service by
the payers on Forms 1099-R. Petitioner stipulated that he
received these payments from qualified plans. Thus, we conclude
that the payments of $464 and $580 were received by petitioner
from qualified plans. Consequently, petitioner is liable for the
penalty imposed by section 72(t) on the premature distributions
in the aggregate amount of $17,875.81.
Issue 6. Rental Expenses
In 1985, petitioners purchased 24583 Sunny Ridge Drive,
Moreno Valley, California (the California property) and rented
the property through Inland Property Management Co. (Inland). On
February 1, 1989, petitioners sold the California property. On
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