- 7 -
Since the distribution in this case is not from an IRA, but
rather from a TSP, the exception provided by section 72(t)(2)(E)
is inapplicable.
Petitioners nevertheless invite us to interpret broadly the
exception under section 72(t)(2)(E) to include the $12,880.04
distribution from the TSP, citing Larotonda v. Commissioner, 89
T.C. 287 (1987). In Larotonda, we concluded that the taxpayers
were not liable for the 10-percent premature distribution penalty
under former section 72(m)(5) when the IRS served a levy against
the taxpayers’ Keogh account for payment of an assessed
deficiency and the bank trustee paid the money directly to the
IRS. Former section 72(m)(5) differed from current section
72(t), particularly in that the former did not include the list
of specific exceptions to tax set forth in section 72(t)(2).
Swihart v. Commissioner, T.C. Memo. 1998-407. Moreover, unlike
petitioners in the present case, the taxpayers in Larotonda never
5(...continued)
incompatible with the intent thereof--
* * * * * * *
(37) Individual Retirement Plan.–-The term
“individual retirement plan” means--
(A) an individual retirement account
described in section 408(a), and
(B) an individual retirement annuity
described in section 408(b).
In contrast, as indicated above, sec. 7701(j)(1) refers to sec.
401.
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