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Georgia residence in March 1999. At some time in 1999,
petitioner transferred his ownership interest in the Michigan
residence to his former wife. Petitioner and his former wife
divorced in November 2002.
During 1999, petitioner withdrew $50,674 from his TESPHE
account to finance the construction of his Georgia residence.
Petitioner’s 1999 distribution from his TESPHE account was not a
loan. At the time of the 1999 distribution from TESPHE,
petitioner had not reached age 59� and was not disabled.
Fidelity issued to petitioner a Form 1099-R, Distributions
From Pensions, Annuities, Retirement or Profit-Sharing Plans,
IRAs, Insurance Contracts, etc., showing a gross and taxable
distribution from his TESPHE account for 1999 of $50,674.
Petitioner timely filed a Form 1040, U.S. Individual Income
Tax Return, for 1999. On his 1999 return, petitioner included in
gross income the $50,674 distribution from his TESPHE account.
Petitioner did not report on his 1999 return the additional 10-
percent tax imposed by section 72(t) with respect to his $50,674
TESPHE distribution.
In the notice of deficiency, respondent determined that
petitioner is liable for the 10-percent additional tax on the
early distribution from petitioner’s section 401(k) plan.
Petitioner timely filed a petition with the Court disputing
the deficiency. Petitioner contends that he qualifies for the
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