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72(t)(2)(C). Section 402(e)(1)(A) provides that an “alternate
payee” who is the spouse or former spouse of the plan participant
shall be treated as the distributee of any distribution or
payment made to the “alternate payee” under a “qualified domestic
relations order” as defined in section 414(p). Thus, section
402(e)(1)(A) treats the alternate payee as the distributee, and
the alternate payee will be taxable on the distribution. Here,
the marital settlement agreement is not a qualified domestic
relations order and does not designate an alternate payee.
Furthermore, the distribution in question is a distribution to
Mr. Ahmad himself, the plan participant. As the settlement
agreement is not a qualified domestic order, and Mr. Ahmad is not
an alternate payee, the exception in section 72(t)(2)(C) is
inapplicable.
In light of the foregoing, the Court holds that petitioners
are liable for the 10-percent additional tax imposed under
section 72(t).
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.
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Last modified: May 25, 2011