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1998, petitioners stipulated that they paid and incurred
qualified higher education expenses of $15,716.
Mr. Urban turned 48 years old in 1998 and was not disabled
at any time during that year.
C. Form 1040
Petitioners timely filed a Form 1040, U.S. Individual Income
Tax Return, for 1998. Petitioners attached to the Form 1040,
inter alia, Schedule A, Itemized Deductions. On line 8 of
Schedule A, petitioners claimed a deduction “Excise tax on sale
of WA residence” in the amount of $12,209.3
Petitioners properly reported on line 15b of the Form 1040
the $30,000 distribution from Mr. Urban’s IRA as taxable income.
Petitioners did not report on their return the 10-percent
additional tax imposed by section 72(t) on that distribution.
D. Notice of Deficiency
In the notice of deficiency, respondent determined that
petitioners are not entitled to a deduction for taxes paid of
$12,209. Respondent further determined that petitioners paid
qualified higher education expenses of $11,580, which amount
reduces the portion of the early distribution that is subject to
the early withdrawal tax. Respondent thus determined that
3 The settlement statement indicated that petitioners paid
an excise tax of $12,068. Petitioners, however, claimed a
deduction for the excise tax in the amount of $12,209. This
discrepancy is unexplained in the record.
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