Richard J. Montgomery and Adele S. Montgomery - Page 11

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          2.   Section 72(t) Issue                                                    
               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             
               As relevant herein, section 4974(c) defines a qualified                
          employer plan as "a plan described in section 401(a) which                  
          includes a trust exempt from tax under section 501(a)" and a plan           
          which the Commissioner at any time has determined to be such a              
               The 10-percent additional tax does not apply to certain                
          distributions.  For example, section 72(t)(2)(A) provides that              
          the 10-percent additional tax does not apply to distributions               
          that are:  (1) Made on or after the date on which the taxpayer              
          attains age 59-1/2; (2) made to a beneficiary (or to the estate             
          of the taxpayer) on or after the death of the taxpayer; (3)                 
          attributable to the taxpayer's being disabled; or (4) made to a             
          taxpayer after separation from service after attainment of age              
          55.  Petitioners do not contend that they qualify for any of the            
          statutory exceptions under section 72(t)(2), and indeed they do             
          not satisfy any of those exceptions.                                        

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