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the section 72(t) additional tax was not applicable in their
case. Respondent, while agreeing that the proceeds withdrawn
from the Employees Retirement System of Texas were used
exclusively for higher education expenses under section 72(t)(7),
contends that the distribution petitioners received was not a
withdrawal from a qualified plan to which the section 72(t)(2)(E)
exception is applicable.
Section 72(t)(1) imposes an additional tax on distributions
from a “qualified retirement plan” equal to 10-percent of the
portion of such amount that is includable in gross income unless
the distribution comes within one of several statutory
exceptions. For purposes of the 10-percent additional tax, a
qualified retirement plan includes both a section 401(k) plan and
an individual retirement account or individual retirement
annuity. See secs. 72(t)(1), 401(a), (k)(1), 4974(c)(1), (4),
and (5). The 10-percent additional tax imposed on early
distributions from qualified retirement plans does not apply to
distributions from an individual retirement plan used for higher
education expenses of the taxpayer for the taxable year. Sec.
72(t)(2)(E). The term “individual retirement plan” is defined as
an individual retirement account or individual retirement annuity
(commonly referred to as IRAs). Sec. 7701(a)(37). Retirement
plans qualified under section 401(a) and (k), however, are not
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Last modified: May 25, 2011