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distributions paid pursuant to section 72(t). Petitioners
resided in Milford, Virginia, at the time they filed their
petition.
The facts are not in dispute and may be summarized as
follows. Petitioner William L. Trace received distributions in
the amount of $114,500 from a qualified retirement plan to which
the additional tax ($11,450) under section 72(t) applied.
Petitioners do not dispute that the additional tax applied to the
distributions or the amount of the additional tax. Petitioners
contend, however, that they are entitled to a deduction on their
1998 Federal income tax return in the amount of the additional
tax under section 164.
The tax for which the deduction here is claimed arises under
section 72(t). Section 72(t) provides that if a taxpayer
receives a distribution from a qualified retirement plan “the
taxpayer’s tax under this chapter * * * shall be increased by an
amount equal to 10 percent of the portion of such amount which is
includible in gross income.” The chapter referred to in section
72(t) pertains to income taxes.
Section 164(a) provides, in pertinent part:
SEC. 164(a). General Rule.--Except as otherwise
provided in this section, the following taxes shall be
allowed as a deduction for the taxable year within which
paid or accrued:
(1) State and local, and foreign, real property
taxes.
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Last modified: May 25, 2011