Larry Joe Mills - Page 5

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          if required".  Form 5329 is for reporting "Additional Taxes on              
          Qualified Plans (Including IRAs) and Other Tax-Favored Accounts".           
               Respondent determined in the notice of deficiency that                 
          petitioner is liable for the additional tax on an early                     
          distribution from a qualified retirement plan.  Petitioner                  
          believes that the additional tax on early distributions is not              
          applicable in this case because he believes his distribution of             
          $25,180 was "forced" under his wife's QDRO.                                 
          The Deduction of Federal Withholding Tax                                    
               Section 62(a)(9) allows deductions under section 165 from              
          gross income for amounts "forfeited to a bank, mutual savings               
          bank, savings and loan association, building and loan                       
          association, cooperative bank or homestead association as a                 
          penalty for premature withdrawal of funds".  The Federal income             
          tax withheld from petitioner's IRA distribution is not an amount            
          forfeited to a bank or other financial institution as a penalty.            
               The Court notes that petitioner also claimed a credit for              
          Federal withholding tax of $4,191 on line 57 of his 1998 Federal            
          income tax return.  That amount represents the sum of the amounts           
          reported on petitioner's Form W-2, Wage and Tax Statement, of               
          $1,673 and the amount reported on his Form 1099-R, Distributions            

               1Because the issues in this case are not factual but are               
          instead legal, sec. 7491 does not apply.                                    

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