T.C. Memo. 2005-162
UNITED STATES TAX COURT
LINDA LOUISE LODDER-BECKERT AND TIMOTHY BECKERT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10752-04. Filed July 5, 2005.
P stopped working in 1999 to attend college. At
that time, P had $34,656.29 in a public employees
retirement system (PERS) account. When she asked PERS
to transfer that balance to an individual retirement
account (IRA), she was advised that the Ohio General
Assembly was actively pursuing legislation that would
significantly increase the value of her PERS account.
P deferred her transfer request and paid for her
education with student loans and credit card debts.
When the legislation was enacted in late 2000, P
renewed her request for the transfer of the PERS
balance (which on account of the legislation then
totaled $81,513.38). PERS completed the transfer on or
about Jan. 2, 2001. In 2001, P requested and received
two distributions from her IRA. P used part of the
distributed amounts to pay down her credit card debts
which were incurred to pay qualified higher education
expenses for 1999 and 2000.
Held: Sec. 72(t)(2)(E), I.R.C., does not allow P
to escape the additional tax of sec. 72(t)(1), I.R.C.,
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