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B. Section 72(t) Additional Tax
The next issue is whether petitioners are liable for the 10-
percent additional tax under section 72(t).
Generally, a distribution from an IRA is includable in the
distributee’s gross income in the year of distribution under the
provisions of section 72. Secs. 61(a)(9), 408(d)(1), (3); see
secs. 408(a), 4974(c)(4). Such distributions made prior to a
taxpayer’s attaining the age of 59-1/2 that are includable in
income generally are subject to a 10-percent early withdrawal tax
unless an exception to the tax applies. Sec. 72(t)(1). As
relevant herein, section 72(t)(2)(E) exempts distributions from
the early withdrawal tax to the extent such distributions do not
exceed a taxpayer’s qualified higher education expenses for the
taxable year. See secs. 72(t)(2)(E), (7); 529(e)(3), (5).
In the instant case, petitioners withdrew $30,000 from Mr.
Urban’s IRA. Petitioners properly included this amount on the
Form 1040 as taxable income. Although respondent initially
determined that petitioners had qualified higher education
expenses of $11,580, the parties stipulated that petitioners had
qualified higher education expenses of $15,716, thus reducing the
amount of the IRA distribution that is subject to the early
withdrawal tax to $14,284. Petitioners, however, did not include
on the Form 1040 the 10-percent early withdrawal tax on any
portion of the IRA distribution. Thus, the issue is whether
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