Richard L. and Stephanie S. Barbee - Page 4

                                        - 3 -                                         

          Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance              
          Contracts, etc., issued by the Employees Retirement System of               
          Texas, petitioners reported the $13,817.18 as income.  In the               
          notice of deficiency, respondent determined that petitioners are            
          liable for the section 72(t) additional tax.  In the explanation            
          of adjustments accompanying the notice of deficiency, the                   
          determination is explained as follows:                                      

               A.  Tax on Premature Distribution                                      
               It is determined that you received a distribution from a               
               retirement plan in the amount of $13,817.00, before age 59-            
               1/2, which is subject to a 10% early withdrawal tax.  The              
               distribution does not meet an exception to the early                   
               withdrawal tax.  Although you used the funds for higher                
               education expenses, the distribution was not made from an              
               individual retirement account.  Accordingly, your tax is               
               increased $1,382.00.                                                   

               Petitioners contend that, because the withdrawn amounts were           
          used exclusively for higher education expenses, they are not                
          subject to the section 72(t) additional tax.  Respondent agrees             
          that the withdrawn proceeds were used exclusively for higher                
          education expenses within the intent and meaning of section                 
          72(t)(2)(E); however, respondent argues that the Employees                  
          Retirement System of Texas is not in the category of qualified              
          plans to which the provisions of section 72(t)(2)(E) are                    
          applicable.  Petitioners argue that they consulted various                  
          employees of the Internal Revenue Service and were advised that             






Page:  Previous  1  2  3  4  5  6  7  8  Next

Last modified: May 25, 2011