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Petitioner did not include the $5,582 distribution as income on
his 1998 Form 1040EZ. In the notice of deficiency, respondent
determined that the $5,582 distribution was includable in
petitioner’s 1998 gross income.
Discussion
For a retirement plan to qualify under section 401(k),
amounts held by the plan which are “attributable to employer
contributions made pursuant to the employee’s election”3 are not
distributable earlier than “separation from service, death, or
disability, * * * the attainment of age 59�, or * * * hardship of
the employee”. Sec. 401(k)(2)(B)(i). If a distribution to the
employee is made, the amount actually distributed “shall be
taxable to the distributee, in the taxable year of the
distributee in which distributed, under section 72”. Sec.
402(a).
Respondent levied on petitioner’s section 401(k) account,
and the compliance with the levy constituted a distribution,
albeit involuntary, from that account to the benefit of
petitioner. See Larotonda v. Commissioner, 89 T.C. 287 (1987).
Preretirement distributions from a qualified retirement plan
are treated as nonannuity distributions. See sec. 72(e)(1). If
3 For purposes of sec. 401(k), “elective contributions * * *
are treated as employer contributions.” Sec. 1.401(k)-
1(a)(4)(ii), Income Tax Regs.
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Last modified: May 25, 2011