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On their joint Federal income tax return for 2001,
petitioners reported as gross income the $83,881 retirement
distribution. Petitioners included with their 2001 tax return
Form 5329, Additional Taxes on Qualified Plans (Including IRAs),
and Other Tax-Favored Accounts, on which they listed the $83,881
retirement plan distribution but elected on Form 5329 that the
distribution was not subject to the early withdrawal tax under
section 72(t). Respondent, in the notice of deficiency,
determined that the $83,881 early distribution was subject to the
additional tax under section 72(t) and determined a deficiency of
$8,388.
Section 72(t) imposes a 10-percent additional tax on early
distributions from a qualified retirement plan. Paragraph (1)
provides in relevant part:
(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 shall be increased by an amount equal to 10 percent
of the portion of such amount which is includable in gross
income.
The 10-percent additional tax, however, does not apply to
certain distributions. Section 72(t)(2) excepts distributions
from the additional tax if the distributions are made: (1) To an
employee age 59-1/2 or older; (2) to a beneficiary (or to the
estate of the employee) on or after the death of the employee;
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Last modified: May 25, 2011