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IRA's are qualified retirement plans as defined in section
4974(c). Sec. 4974(c)(4). Section 72(t)(2) provides for certain
exceptions, none of which apply to petitioner.
Petitioner argues that the IRA distributions should not be
subject to the section 72(t) tax because he personally did not
receive the funds or receive a benefit therefrom and the
withdrawals were involuntary. Respondent counters with the
assertion that, unless one of the exceptions applies, statutory
language requires the imposition of the addition to tax,
irrespective of actual receipt by or benefit to the taxpayer or
the "voluntary" nature of the distribution.
Petitioner constructively received the IRA distributions
when his accounts were forfeited and cannot escape taxation on
the basis that the funds were disbursed to a third party.
Larotonda v. Commissioner, 89 T.C. 287, 291 (1987) (Keogh plan
withdrawal pursuant to respondent's income tax levy)5; Vorwald v.
Commissioner, T.C. Memo. 1997-15 (IRA garnished to pay child
support); cf. Kochell v. United States, 804 F.2d 84 (7th Cir.
1986) (trustee in bankruptcy, who succeeded to rights of IRA
beneficiary, was held taxable on distribution used to satisfy
creditors of the beneficiary).
5 See also Pilipski v. Commissioner, T.C. Memo. 1993-461
(to the same circuit).
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Last modified: May 25, 2011