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From Pensions, Annuities, Retirement or Profit-Sharing Plans,
IRAs, Insurance Contracts, etc., issued by PCB that shows Federal
income tax withheld of $2,518. What petitioner did was to claim
a deduction and a withholding credit for the same $2,518.
Petitioner properly reported the amount as Federal income tax
withheld. The Court concurs in respondent's determination that
the deduction of the $2,518 as an amount forfeited as a penalty
to a bank is improper.
Additional Tax on Early Distributions
Section 72(t)(1) provides for the imposition of a 10-percent
additional tax on early distributions from qualified retirement
plans with certain exceptions.
Petitioner testified that he received the distribution of
$25,180 in 1998 upon the oral advice of a bank employee. If he
was going to make the QDRO distribution to his wife, "she said
you have to take it all out. You can't take a part of it out
without borrowing the money to replace it back." Unfortunately
for petitioner, he relied on bad advice. Even if the advice were
true, however, the operative provision offers him no relief.
Section 72(t)(2) provides that the additional tax on early
distributions shall not apply to certain types of distributions.
One type of distribution that is not subject to the additional
tax is "Payments to alternate payees pursuant to qualified
domestic relations order". Sec. 72(t)(2)(C). Under this
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Last modified: May 25, 2011