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2. 10-Percent Additional Tax on Early Distributions
Section 72(t)(1) imposes an additional 10-percent tax on
that portion of a distribution from a qualified retirement plan
that is includable in the taxpayer’s gross income. The 10-
percent additional tax does not apply to certain distributions as
set forth in section 72(t)(2). Generally these exceptions
include distributions made on or after the date the employee
reaches the age of 59-1/2, sec. 72(t)(2)(A)(i), made to a
beneficiary on or after the death of the employee, sec.
72(t)(2)(A)(ii), and when attributable to a disability of the
employee, sec. 72(t)(2)(A)(iii).
Petitioner does not argue that any of the statutory
exceptions under section 72(t)(2) apply to his situation, and
indeed none of them do. Instead, he is seeking relief on the
grounds that because the distribution from his IRA did not cash-
out his Allen’s Creek investment he should not be subject to the
10-percent additional tax. He testified that he is having
financial problems, needs the immediate use of the money he
invested in the Allen’s Creek project, and that if he had
received this amount as a cash distribution he would not object
to paying the tax owed.
However unfortunate petitioner’s situation may be, there is
no exception under section 72(t) for financial hardship. This
principle has been applied consistently in cases dealing with
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Last modified: May 25, 2011