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The amount of any distribution to a taxpayer from a qualified
pension plan described in section 401(a) generally is includable in
gross income in the year of distribution. Sec. 402(a)(1). Such
distribution includes the outstanding balance of any loan at the
time of the beneficiary's separation from service or default on the
note. Murtaugh v. Commissioner, T.C. Memo. 1997-319; see also
Minnis v. Commissioner, 71 T.C. 1049, 1056 (1979); Dean v.
Commissioner, T.C. Memo. 1993-226. However, if a portion of the
amount distributed is rolled over to another qualified pension plan
within 60 days following receipt of the distribution, that portion
is not includable in gross income in the year of distribution.
Sec. 402(a)(5).
If the taxpayer fails to roll over distributed funds within 60
days, and the distribution is made before the date the taxpayer
attains the age of 59-1/2, and none of the other exceptions in
section 72(t)(2) applies, the tax on the distribution is increased
by an amount equal to 10 percent of the portion includable in gross
income. Sec. 72(t).
Petitioner was 54 years old at the time he received his
distribution from Heidelberg & Woodliff's salary reduction plan; he
did not roll over such funds into another qualified plan. See
Rodoni v. Commissioner, 105 T.C. 29, 32-34 (1995); Clark v.
Commissioner, 101 T.C. 215, 224-225 (1993). He unquestionably
received and negotiated the $36,424.07 distribution check from
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