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expenses of petitioner’s daughter under section 72(t)(2)(E), and,
therefore, the section 72(t) addition to tax was not applicable
to that portion of the distribution. The remainder of the
pension plan distribution, or $30,440, was determined to be
subject to the section 72(t) additional tax for the reason that
petitioner did not substantiate that this portion of the
distribution was used for higher education expenses.
At trial, respondent’s position was that no portion of the
$67,552.64 early distribution qualified for higher education
expenses for the reason that the pension plan of the school
system was not in the category of qualified plans as to which the
provisions of section 72(t)(2)(E) are applicable. The parties
stipulated, as noted above, that the school system plan was
qualified under section 403(b).2
Section 72(t)(1) imposes an additional tax on distributions
from a “qualified retirement plan” equal to 10-percent of the
portion of such amount that is includable in gross income unless
the distribution comes within one of several statutory
exceptions. For purposes of the 10-percent additional tax, a
2Even though respondent’s position at trial was that no
portion of the $67,552.64 early withdrawal was subject to
exclusion from the sec. 72(t) additional tax, counsel for
respondent stated that respondent would not move to increase the
deficiency to apply the sec. 72(t) additional tax to the
$37,112.64, which was allowed as a higher education expense prior
to issuance of the notice of deficiency.
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Last modified: May 25, 2011