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Domanico used her 401(k) plan distribution for a commendable
purpose; i.e., to pay for higher education expenses, the
distribution does not qualify for the higher education expenses
exception under section 72(t)(2)(E) because the distribution was
not from an IRA. Although the common retirement-oriented purpose
of a 401(k) plan and an individual retirement plan may have led
petitioners to a “finite misinterpretation” based on their
reading of the Master Tax Guide, a 401(k) plan and an individual
retirement plan are separate and distinct in that only
withdrawals from an IRA may qualify for this exception.6 See
secs. 72(t)(2)(E), 401(k), 408(a), and (b). The distinction
between the two for purposes of section 72(t)(2)(E) may appear to
exalt form over substance, but it is a distinction that is
legislatively mandated.
In closing, we think it appropriate to observe that we found
petitioners to be very conscientious taxpayers who obviously take
their Federal tax responsibilities quite seriously. We recognize
that the difference between a qualified retirement plan and an
5(...continued)
attributable to an employee’s being disabled, or (3) made to an
employee after separation from service after attainment of age of
55) apply in this case.
6 In contrast to petitioners’ “finite misinterpretation”,
we note that par. 2179 of the Master Tax Guide is consistent with
the statutory language in that it identifies education expenses
as an additional exception that applies “when early distributions
are made from an IRA”.
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