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Respondent determined a deficiency in petitioners’ Federal
income tax of $6,858 for 2001.
The issue for decision is whether petitioners are liable for
the 10-percent additional tax on early distributions pursuant to
section 72(t).
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits received into evidence
are incorporated herein by reference. Petitioners resided in
Clarkston, Michigan, at the time the petition was filed.
During 2001, Donald Marion Fenton (petitioner) was an
automotive engineer with the IBM Corporation, and Bethany Diane
Fenton was a homemaker. Petitioners timely filed their 2001
Federal income tax return.
In late 2001, after petitioner was laid off from IBM, he
received two distributions from the IBM Corporation 401(k) Plan
in the total amount of $68,583. The 401(k) plan is a retirement
plan qualified under section 401(a). Petitioners reported the
distributions from the 401(k) plan as income on their 2001
return. Petitioners did not compute the 10-percent additional
tax due on early distributions from qualified retirement plans.
Petitioner used the funds to pay family expenses, including
the downpayment on a home and college tuition for his daughter.
Petitioner also used the funds to pay family support expenses,
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