Harold L. and Gladys M. Humberson - Page 17

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          distribution issue that this Court has reached.  Sites v. United            
          States, 75 AFTR 2d 95-2504, 95-1 USTC par. 50,280 (D. Md. 1995).            
          The final paragraph of the district court's analysis deserves to            
          be quoted:                                                                  
                    The Court believes that the statutory analysis and                
               reasoning of Hoppe [v. Commissioner, T.C. Memo. 1994-                  
               635] is sound.  Because the Retirement System and                      
               Pension System were both maintained by Taxpayer's                      
               employer, the State of Maryland, they are to be                        
               aggregated for purposes of determining the "balance to                 
               the credit" of an employee under section 402(e)(4)(A).                 
               Whereas Taxpayer received a refund of his contributions                
               and the accumulated interest, his service credits were                 
               transferred to and remained within the Pension System.                 
               * * *  By choosing to transfer to the Pension System, *                
               * * [Taxpayer] opted * * * to receive a refund of his                  
               contributions and accumulated interest along with                      
               reduced annuity payments in the future.  Thus, in                      
               effect, Taxpayer elected to receive the "balance to the                
               credit" of his account in two-parts: the refund payment                
               and the future annuity payments.  Consequently, he did                 
               not receive the "balance to the credit" of his account                 
               on * * * [the Transfer Refund date].  Id.  [75 AFTR 2d                 
               95-2504, 95-1 USTC par. 50280 at 88,031].                              
          Section 72(t) Additional Tax Issue                                          
               We turn next to respondent's determination that petitioners            
          are liable for the 10-percent additional tax imposed by section             
          72(t).                                                                      
               Section 72(t) provides for a 10-percent additional tax on              
          early distributions from qualified retirement plans.  Subsection            
          (1), which imposes the tax, provides in relevant part as follows:           
                    (1) Imposition of additional tax.--If any taxpayer                
               receives any amount from a qualified retirement plan                   
               * * * the taxpayer's tax under this chapter for the                    
               taxable year in which such amount is received shall be                 
               increased by an amount equal to 10 percent of the                      
               portion of such amount which is includible in gross                    
               income.                                                                



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