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distribution from the IRA. Petitioners used the money to pay
bills, tuition at their son’s private high school, and other
personal expenses. Petitioners did not report the $6,000
distribution on their Federal income tax return for 1997.
No portion of the distribution was rolled over into another
IRA or other retirement account. The distribution was not paid
on account of disability, was not paid as part of a series of
substantially equal periodic payments made for life, and was not
paid for medical care.
OPINION
Petitioners contend that, because of their financial
hardship, the $6,000 distribution should not be included in their
gross income and, if it is, they should not be subject to the
10-percent additional tax imposed by section 72(t). Petitioners
seek relief from the income tax and additional 10-percent tax
imposed on the IRA distribution based on their financial
hardship. There is, however, no hardship exception in the
controlling statutes.
Generally, any amount paid or distributed out of an
individual retirement plan is included in gross income by the
payee or distributee. See sec. 408(d)(1); sec. 1.408-4(a)(1),
Income Tax Regs; see also Arnold v. Commissioner, 111 T.C. 250,
253 (1998). Section 408(d)(3) provides an exception to the
general rule where the entire amount received is paid into an IRA
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Last modified: May 25, 2011