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quarterly investment reports sent to Ann E. Owens on or about
June 10, 1999, and September 9, 1999.
Petitioners filed a joint Form 1040, U.S. Individual Income
Tax Return, for 1999. On their return they included $20,049 as a
taxable pension distribution, based on the foregoing May 20th
withdrawal, but they did not report the 10-percent additional tax
attributable to a premature IRA withdrawal. On August 22, 2001,
respondent issued to petitioners a notice of deficiency
determining that they were liable for this additional tax in the
amount of $2,000.
Discussion
I. General Rules
In general, section 408 governs the treatment of IRAs.
Specifically, section 408(d) provides that distributions from an
IRA are taxable in the manner directed in section 72 unless
properly rolled over within 60 days into another IRA or eligible
retirement plan. Section 72 typically operates to include
distributions in gross income, and subsection (t) provides for an
additional tax on premature distributions, reading as follows in
relevant part:
SEC. 72(t). 10-Percent Additional Tax on Early
Distributions from Qualified Retirement Plans.--
(1) Imposition of additional tax.--If any
taxpayer receives any amount from a qualified
retirement plan (as defined in section 4974(c)),
the taxpayer’s tax under this chapter for the
taxable year in which such amount is received
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