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Discussion4
Generally, a distribution from a qualified employees’ trust
(including a profit sharing plan) is taxable to the distributee
in the year of distribution under the provisions of section 72.
Sec. 402(a); see sec. 401(a). Section 402(c) provides an
exception to the general rule for qualified “rollovers” by the
employee to “an eligible retirement plan” within 60 days of
receipt.5 Sec. 402(c)(1), (3), (5).
Section 72(t)(1) imposes an additional tax on distributions
from a qualified retirement plan equal to 10-percent of the
portion of such amount that is includable in gross income. For
purposes of the 10-percent tax, a qualified retirement plan
includes a profit sharing plan described under section 401(a).
See sec. 4974(c)(1).
Section 72(t)(2) exempts the following distributions from
the additional tax if the distributions are made: (1) To an
employee age 59-1/2 or older; (2) to a beneficiary (or to the
estate of the employee) on or after the death of the employee;
(3) on account of the employee being disabled; (4) as part of a
4 We need not decide whether sec. 7491, concerning burden
of proof, applies to the present case because the facts are not
in dispute and the issue is one of law. See Higbee v.
Commissioner, 116 T.C. 438 (2001).
5 An “eligible retirement plan” is defined to include: (1)
An individual retirement account described in sec. 408(a); (2) an
individual retirement annuity described in sec. 408(b) (other
than an endowment contract); (3) a qualified trust; and (4) an
annuity plan described in sec. 403(a). Sec. 402(c)(8)(B).
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Last modified: May 25, 2011