David W. Chiu - Page 10

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            the Hong Kong & Shanghai Banking Corp.  Petitioner argued that                               
            the Hong Kong & Shanghai Banking Corp. owns Midland Bank, a U.S.                             
            bank, but this factor does not affect our conclusion regarding                               
            the probable situs of any trust created in connection with the                               
            IRA funds transfer.  On this record, we conclude that petitioner                             
            has failed to show that the $17,558 that he withdrew from the                                
            Varian IRA was paid into a trust or custodial account created and                            
            maintained in the United States, as required by section 408(a)                               
            and (d)(3)(A)(i), and section 1.408-2(b), Income Tax Regs., and                              
            therefore such amount is includable in his gross income.                                     
                  Amounts paid or distributed out of an IRA must be included                             
            in gross income "in the manner provided under section 72".  Sec.                             
            408(d)(1).  A 10-percent tax on "early distributions" generally                              
            applies where a taxpayer receives a distribution from a qualified                            
            retirement plan which is includable in his gross income.  Sec.                               
            72(t)(1).  For purposes of the 10-percent tax, a qualified                                   
            retirement plan includes an IRA described under section 408(a).                              
            Sec. 4974(c)(4).  Although section 72(t)(2) sets forth certain                               
            exceptions to the 10-percent tax on early distributions,                                     
            petitioner has presented no evidence to suggest he fits within                               
            any of these exceptions.  Therefore, we find that petitioner is                              
            liable for the 10-percent additional tax under section 72(t).                                

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