Frederick W. Haas and Donna S. Haas - Page 5

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                              (A) In general.--Distributions which are--              
                    *        *        *        *        *        *        *           
                                   (iii) attributable to the employee’s               
                              being disabled within the meaning of                    
                              subsection (m)(7) * * *.                                
               Section 72(m)(7) provides:                                             
                    (7) Meaning of disabled.--For purposes of this section,           
               an individual shall be considered to be disabled if he is              
               unable to engage in any substantial gainful activity by                
               reason of any medically determinable physical or mental                
               impairment which can be expected to result in death or to be           
               of long-continued and indefinate duration.  An individual              
               shall not be considered to be disabled unless he furnishes             
               proof of the existence thereof in such form and manner as              
               the Secretary may require.                                             
          The regulations provide, inter alia, that to be considered                  
          disabled a person is unable to engage in any “substantial gainful           
          activity”.  Substantial gainful activity means the activity, or a           
          comparable activity, in which the individual customarily engaged            
          prior to the disability.  Sec. 1.72-17(f)(1), Income Tax Regs.              
               Petitioners agree that there was a distribution during the             
          taxable year 2001 and that the distribution was taxable.  The               
          question solely concerns whether the section 72(t) additional tax           
               Petitioners maintain that petitioner was disabled within the           
          meaning of section 72(m)(7) during the year of the distribution.            
          This is somewhat peculiar since petitioner, during the entire               
          2001 year, was paid a $93,165 salary for his employment with IT.            
          Furthermore, the reports from his doctors provide that, while he            

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