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ownership interest in a principal residence during the 2-year
period ending on the date of acquisition of the principal
residence. Sec. 72(t)(8)(D)(i). The date of acquisition is the
date into which a binding contract was entered or when
construction or reconstruction of such a residence was commenced.
Sec. 72(t)(8)(D)(iii).
Petitioner purchased his home in 1999 and refinanced it in
2001. Petitioner had a present ownership interest in his home
during the 2-year period prior to 2001. Petitioner did not
acquire, construct, or reconstruct a home in 2001. Therefore,
this exception does not apply to petitioner.
Thus, the IRA distribution received by petitioner is subject
to the 10-percent additional tax under section 72(t).
Interest Income
Gross income means all income from whatever source derived.
Sec. 61(a). Under section 61(a)(4), interest is includable in
gross income.
Petitioner does not dispute that he received $17 of interest
income in 2001. Petitioner did not report any amounts received
from the Virginia Department of Taxation on his 2001 Federal
income tax return and, therefore, is liable for the deficiency
caused by his failure to report the interest.
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Last modified: May 25, 2011