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accounts were forfeited to the Federal Government, including
funds in an IRA. This Court determined that the taxpayer was not
liable for the section 72(t) additional tax on those
distributions because they were outside the class of early
distributions Congress intended to discourage by enacting section
72(t). Like Larotonda v. Commissioner, supra, Murillo involved a
surrender of funds held in an IRA to the Federal Government, and
this Court recognized a very limited exception to the provisions
of section 72(t).
While there was a compulsion to withdraw funds in Larotonda,
Murillo, and in this case, compulsion is not the sole
determinative factor, and we decline to extend the rationale of
those cases to the situation here. Rather, this case is
analogous to Czepiel v. Commissioner, T.C. Memo. 1999-289, affd.
by order (1st Cir., Dec. 5, 2000). In that case, as here, the
taxpayer was incarcerated for failure to pay his former spouse a
pecuniary division of marital property. The taxpayer withdrew
funds from an IRA to satisfy the judgment. We held that under
those facts the taxpayer was subject to the additional tax under
section 72(t) and distinguished Larotonda and Murillo on the
ground that “the IRA distributions [in Czepiel] were not made
without any active participation by” the taxpayer. Id. That is
equally true of the distribution here.
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Last modified: May 25, 2011