- 9 - 402(e)(4)(A). Respondent also contends that petitioners are liable for the 10-percent additional tax imposed by section 72(t) because the Transfer Refund constitutes an early distribution from a qualified retirement plan. Petitioners disagree. Lump Sum Distribution Issue As a general rule, a distribution from a qualified plan, such as the Retirement System, is taxed to the recipient in the year distributed under the rules relating to annuities. Sec. 402(a)(1); see sec. 72. However, section 402(e)(1) provides a preferential forward averaging method of computing the tax on certain such distributions. The parties agree that petitioners are entitled to this preferential method of computing the tax on the Transfer Refund if the Transfer Refund constitutes a "lump sum distribution" within the meaning of section 402(e)(1)(A).10 A lump sum distribution, for purposes of section 402, is defined in section 402(e)(4)(A) as follows: (A) Lump sum distribution.--For purposes of this section * * * , the term "lump sum distribution" means the distribution or payment within one taxable year of 10 The Tax Reform Act of 1986 replaced the 10-year forward averaging method with a 5-year forward averaging method for lump sum amounts distributed after Dec. 31, 1986, in taxable years ending after such date. Tax Reform Act of 1986, Pub. L. 99-514, sec. 1122(a)(2), (h)(1), 100 Stat. 2085, 2466, 2470. However, Tax Reform Act of 1986, secs. 1122(h)(5) and 1124 provide transitional rules under which lump sum distributions made after Dec. 31, 1986, will nevertheless continue to qualify, under certain limited circumstances, for the more generous 10-year forward averaging method; 100 Stat. 2085, 2471, 2475. Because of his age, petitioner falls within the scope of the transitional rules, provided, of course, that the Transfer Refund qualifies as a lump sum distribution.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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