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Form 5329 submission and allow any differences of opinion to
be settled in a timely manner by a court of competent
jurisdiction.
Petitioners have selected this Court as the forum to decide
that question. This Court's conclusion is that financial
hardship is not a category or basis for an exception from the
section 72(t) additional tax on early retirement plan
distributions. Milner v. Commissioner, T.C. Memo. 2004-111;
Gallagher v. Commissioner, T.C. Memo. 2001-34 (and cases cited).
Petitioners have simply crafted an additional category of
exception that is clearly beyond the intent and meaning of
section 72(t)(2) and the instructions petitioners relied on.
Their argument fails.
Petitioners also contend that respondent is precluded from
making an assessment against them for the section 72(t) penalty
because respondent never filed a proof of claim in their
bankruptcy proceeding. That argument is also rejected because,
whether or not a proof of claim was filed, a discharge in
bankruptcy does not discharge an individual debtor from an
obligation with respect to a return that was either not filed, or
a return that was due to be filed, less than 3 years before the
date of filing the bankruptcy petition. In this case,
petitioner's income tax return for the year 2000 was filed well
within the 3-year period prior to the filing of their bankruptcy
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Last modified: May 25, 2011