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distribution was subject to the 10-percent additional tax imposed
by section 72(t).
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in Houston, Texas, at the time they
filed their petition. In 1976, petitioner opened an IRA as
described in section 408(a). Petitioners made additional
contributions to the IRA over the next several years.
Petitioners claimed deductions on their Federal income tax
returns under section 219 for all of their contributions to the
IRA. Petitioners made no nondeductible contributions to the IRA.
Petitioner was a civil engineer employed by the City of
Houston, Texas, from May 6, 1985, until sometime in 1997.
Petitioner was involuntarily demoted by the City of Houston
effective December 3, 1996. The demotion resulted in a decrease
of $11,700 to petitioner’s annual salary. In November 1997,
petitioner began working full time for the City of Pearland,
Texas.
Because of financial hardship, in early 1997 petitioner
requested a $6,000 distribution from the administrator of the
IRA. Petitioner was 46 years old at the time he received the
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