Charlotte and Charles T. Gee - Page 4

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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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