- 5 -
determined that petitioner owed a 10-percent additional tax on
the early distribution from the USAA SIP.
OPINION
Section 402(a) provides generally that distributions from a
qualified plan are taxable to the distributee, in the taxable
year of the distributee in which distribution occurs, pursuant to
section 72. The amount of a distribution to a taxpayer from a
qualified pension plan generally includes the proceeds of any
loan from the plan to the taxpayer. See Scott v. Commissioner,
T.C. Memo. 1997-507, affd. without published opinion 182 F.3d 915
(5th Cir. 1999); Murtaugh v. Commissioner, T.C. Memo. 1997-319.
Section 72(p)(1)(A) provides: “If during any taxable year a
participant or beneficiary receives (directly or indirectly) any
amount as a loan from a qualified employer plan, such amount
shall be treated as having been received by such individual as a
distribution under such plan.” Section 72(p)(2) provides an
exception to this general rule. The exception will apply and the
loan will not be treated as a taxable distribution if: (1) The
principal amount of the loan (when added to the outstanding
balance of all other loans from the same plan) does not exceed a
specified limit; (2) the loan, by its terms, must be repaid
within 5 years from the date of its inception or is used to
finance the acquisition of a home that is the principal residence
of the participant; and (3) the loan must have substantially
Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011