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The Court agrees with respondent that petitioner did not use
a reasonable growth rate in calculating the periodic
distributions. Neither party cited any case law directly on
point that would establish a means by which a reasonable growth
rate can be determined to calculate a series of substantially
equal periodic payments within the meaning of section
72(t)(2)(A)(iv). However, with reference to the fixed
amortization method, IRS Notice 89-25 cites one example that
assumes that an interest rate of 8 percent is reasonable for a
50-year old individual with a life expectancy of 33.1. The
record fails to persuade the Court that a 21-percent departure
from this example is reasonable. Petitioner’s age at the time of
the first distribution was approximately 52, and his life
expectancy was 30.4 years. These factors are comparable to the
example in IRS Notice 89-25. The interest rate petitioner used
differed significantly. In effect, his use of such a generous
growth rate would allow premature distributions in contravention
of the legislative purpose underlying the section 72(t) tax,
namely, to discourage premature distributions from IRA’s. Arnold
v. Commissioner, 111 T.C. 250, 255 (1998). Although petitioner
presented evidence to establish the basis upon which he arrived
at the chosen growth rate, that evidence fails to establish that
such a rate was “reasonable” within the intent and meaning of
section 72(t)(2)(A)(iv).
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