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apply to distributions made to employees “to the extent such
distributions do not exceed the amount allowable as a deduction
under section 213 to the employee for amounts paid during the
taxable year for medical care (determined without regard to
whether the employee itemizes deductions for such taxable year).”
The deduction allowed under section 213(a) is for “the expenses
paid during the taxable year * * * for medical care * * * to the
extent that such expenses exceed 7.5 percent of adjusted gross
income.”
Petitioner argues that her medical expenses for 2000 and
2001 should be applied to reduce the taxable amount of the
distribution. The clear language of section 72(t)(2)(B) limits
the scope of the exemption to the amount of deductible medical
expenses “paid during the taxable year” of the distribution.
Thus, the section 72(t)(2)(B) exemption does not apply to the
medical expenses that petitioner paid in 2000 because the taxable
year of the early distribution from her USAA SIP account was
2001.
To reflect the foregoing and the parties’ agreement as to
the amount of petitioner’s allowable 2001 medical expenses,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011