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In their pretrial memorandum, however, petitioners argue
that the additional tax imposed under section 72(t)(1)
constitutes a “penalty” the imposition of which in this case
would create undue hardship on petitioners. Petitioners state
that “Congress intended the law to be liberally applied in favor
of the taxpayer in cases in which the taxpayer was forced to
retire and forced to accept a distribution from the retirement
plan.”
Nothing in the legislative history of section 72(t) supports
petitioners’ interpretation of the purpose of section 72(t)(1).
To the contrary, the Senate Finance Committee, in the legislative
history of section 408(f), the predecessor to section 72(t),
stated that the purpose of the 10-percent additional tax was to
discourage early distributions from retirement plans because
“Premature distributions frustrate the intention of saving for
retirement”. S. Rept. 93-383, at 134 (1974), 1974-3 C.B. (Supp.)
80, 213; see also H. Conf. Rept. 93-1280, at 339 (1974), 1974-3
C.B. 415, 500. The Senate Finance Committee went on to state
that the purpose of the additional tax was to prevent such
premature distributions.
We find no authority in the Code, the legislative history,
caselaw, or Internal Revenue Service notices and private letter
1(...continued)
certain expenses for medical care. Petitioners stipulated that
the $55,555 distribution petitioner received was not used for
medical care.
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