- 2 - Respondent determined a deficiency of $10,000 in petitioners’ 1998 Federal income tax. The issue is whether petitioners are liable for the 10-percent additional tax under section 72(t) on an early distribution from a qualified section 401(k) retirement plan. Petitioners resided in Mt. Sinai, New York, at the time the petition was filed. The applicable facts may be summarized as follows.2 In 1998, petitioner Alphonse M. Esposito (petitioner) withdrew $100,000 from his retirement plan to pay the higher education expenses for four of his children. In preparing their 1998 Federal income tax return, petitioners included the $100,000 distribution but did not report the additional tax for an early distribution under section 72(t). In the notice of deficiency, respondent determined petitioners were liable for the additional tax. Section 72(t)(1) imposes an additional tax of 10 percent of the taxable amount received from a “qualified retirement plan (as defined in section 4974(c))”. Petitioner maintains that the additional tax does not apply because the distribution qualifies under section 72(t)(2)(E). Section 72(t)(2)(E) provides that the additional tax on early distributions does not apply to “distributions to an 2 The facts are not in dispute, and the issue is primarily one of law. Sec. 7491, concerning burden of proof, has no bearing on this issue.Page: Previous 1 2 3 4 5 Next
Last modified: May 25, 2011