- 4 - return. The correct distribution code should have been for “a distribution of IRA for her deceased husband.” Respondent determined that, although the distribution would have been exempt from the 10-percent additional tax when it was made to petitioner’s IRA upon Mr. Campbell’s death, the funds became subject to the 10-percent additional tax when distributed to her from her own IRA. Respondent also determined that petitioners are liable for the accuracy-related penalty for substantial understatement of income tax. Petitioners timely filed a petition with this Court contesting respondent’s determinations in the deficiency notice. Discussion I. Whether the IRA Distribution Was Subject to the 10-Percent Additional Tax on Early Distributions We are asked to decide whether petitioner is liable for the 10-percent additional tax on early distributions under section 72(t). Section 72(t) imposes a 10-percent additional tax on the amount of an early distribution from a qualified retirement account (as defined in section 4974(c)).3 See sec. 72(t)(1). Section 72(t)(2) provides for certain exceptions to the imposition of this 10-percent additional tax. The parties agree that the only relevant exception is section 72(t)(2)(A)(ii), which provides that distributions “made to a beneficiary (or to the estate of the employee) on or after the death of the employee” are not subject to the 10-percent 3The parties agree that petitioner received the distribution in 2002 from her IRA, which was a qualified retirement plan under sec. 4974(c)(4).Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011