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In view of our conclusion, supra, that petitioner's Transfer
Refund qualifies for tax-free rollover treatment in 1989 under
section 402(a)(5)(D), we understand petitioners to abandon what
must be viewed as their alternative contentions concerning the
alleged excludibility of $150,000 of petitioner's IRA
distribution from gross income for 1990. In any event, such
amount is properly includable in petitioners' gross income for
that year. Sec. 408(d)(1).
III. Section 72(t) Additional Tax Issue
We turn next to respondent's determination that petitioners
are liable for the additional tax under section 72(t) for 1989
and 1990.
Section 72(t) provides for a 10-percent additional tax on
early distributions from qualified retirement plans. Paragraph
(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
(as defined in section 4974(c)), 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.
Pursuant to section 4974(c), the term "qualified retirement
plan" includes plans described in section 401(a) and individual
retirement accounts described in section 408(a). The Retirement
System from which petitioner received his Transfer Refund in 1989
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