Brian P. Keeley and Mary G. Keeley - Page 10

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          the date on which the taxpayer attains the age of 59-� are not              
          “early” and therefore not subject to the additional tax.  Sec.              
          72(t)(2)(A)(i).  As relevant to the present case, section                   
          72(t)(2)(A)(iii) provides an exception for distributions                    
          “attributable to the employee’s being disabled within the meaning           
          of subsection (m)(7)”.11  There are also limited exceptions                 
          available for distributions made to an employee for medical care            
          expenses, sec. 72(t)(2)(B),12 and for qualified higher education            
          expenses, sec. 72(t)(2)(E).                                                 
               Petitioners contend that the exception under section                   
          72(t)(2)(A)(iii) applies because Mr. Keeley was disabled during             
          the years in issue because of severe depression that petitioners            
          thought was indefinite and for which Mr. Keeley is still under              
          medical treatment.  On the other hand, respondent argues that Mr.           
          Keely was not disabled because “a long-term psychiatric illness             
          where petitioner [Mr. Keeley] is able to work and where there               
          wouldn’t be a need for some type of constant treatment” is                  
          inconsistent with the definition of disability under section                


               11  For purposes of sec. 72(t), the term “employee” includes           
          participants in individual retirement plans.  Sec. 72(t)(5).                
               12  In the petition, petitioners appear to contend that the            
          exception for medical expenses under sec. 72(t)(2)(B) may apply.            
          However, petitioners did not present any evidence in support of             
          this contention, presumably because their unreimbursed medical              
          and dental expenses on both returns did not exceed 7.5 percent of           
          their adjusted gross income.  See sec. 213(a); Dwyer v.                     
          Commissioner, 106 T.C. 337, 343 (1996).                                     





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