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Bellevue, Washington. During this time, petitioners paid real
property taxes based on the assessed value of the property.
On June 12, 1998, petitioners sold their residence for
$678,000. Petitioners paid $12,068 in Washington State real
estate excise tax on the sale of their residence. Petitioners’
settlement statement concerning the sale of their residence
listed on line 1204: “Government Recording and Transfer
Charges: Excise Tax $12,068.” After the sale of their residence,
petitioners relocated to Portland, Oregon.
B. IRA Distribution
During the year in issue, petitioners had one daughter in
her sophomore year at Arizona State University and one daughter
completing high school. In the same year, Mr. Urban started a
master’s degree program in business. Petitioners estimated that
they would incur approximately $25,000 in education expenses for
1998.
To cover their education expenses, Mr. Urban withdrew
$30,000 from his Merrill Lynch IRA. Petitioners calculated that
this amount would be sufficient to cover their estimated
education expenses of $25,0002 as well as any Federal income
taxes associated with the early withdrawal. For the taxable year
2 Petitioners reduced their education expense estimate to
approximately $20,000 because they later learned that high school
does not qualify as higher education.
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