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section 72(t)(1) will be imposed retroactively on prior
distributions made before the taxpayer attains age 59-1/2, plus
interest. This retroactive application of the 10-percent tax under
section 72(t)(4) is known generally as a recapture tax. See infra.
Petitioners contend that the November 1993 distribution of
$6,776 did not impermissibly modify a series of substantially equal
periodic payments. Petitioners make two principal arguments in
support of this claim.
First, petitioners contend that the November 1993 distribution
occurred after the series of substantially equal periodic payments
was completed in January 1993, and thus no modification occurred.
Respondent asserts that petitioners' contention contradicts the
plain language of section 72(t)(4) which requires no modifications
within a 5-year period. Respondent notes that in this case the 5-
year period beginning with the date of the first distribution ran
from 1989 through 1994. Thus, respondent argues, the November 1993
distribution was premature and hence impermissibly modified the
series of substantially equal periodic payments.
Respondent's position is supported by the legislative history
of section 72(t). The conference report accompanying the Tax
Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, supports the
proposition that the period described in section 72(t)(4)(A)(ii)
must be completed before further distributions can be received to
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