-6-
On January 8, 2001, petitioner withdrew $15,000 from her
IRA. Approximately 5 months later, she withdrew another $5,000
from her IRA. She used $7,937 of the $20,000 ($15,000 + $5,000)
to pay her qualified higher education expenses incurred in 2001.
She also used part of the $20,000 to pay down her credit card
debts consisting, in part, of her qualified higher education
expenses that were charged to those cards before December 31,
2000.
Petitioners reported the $20,000 as gross income on their
2001 Federal income tax return, but they did not report or pay
any additional tax under section 72(t)(1) with respect thereto.
Respondent determined in the notice of deficiency that the
$20,000 was subject to that additional tax. Respondent has since
conceded that $7,937 of the distributions is not subject to the
additional tax under section 72(t)(1) by virtue of section
72(t)(2)(E) and of the fact that petitioner used those funds
during 2001 to pay $7,937 of her qualified higher education
expenses for 2001.
OPINION
Respondent determined that the distributions made to
petitioner out of her IRA were subject to the 10-percent
additional tax of section 72(t)(1). As relevant here, section
72(t)(1) imposes that tax on an early distribution from an IRA.
See also secs. 408(a), 4974(c)(4). Section 72(t)(2)(E) is an
Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011