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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).
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Last modified: May 25, 2011