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Discussion
Section 72(t)(1) generally imposes a 10-percent additional
tax on premature distributions from “a qualified retirement plan
(as defined in section 4974(c))”, unless the distributions come
within one of the statutory exceptions under section 72(t)(2).
The legislative purpose underlying the section 72(t) tax is
that “‘premature distributions from IRAs frustrate the intention
of saving for retirement, and section 72(t) discourages this from
happening.’” Arnold v. Commissioner, 111 T.C. 250, 255 (1998)
(quoting Dwyer v. Commissioner, 106 T.C. 337, 340 (1996)); S.
Rept. 93-383, at 134 (1974), 1974-3 C.B. (Supp.) 80, 213.
Section 72(t)(2)(A)(iii) provides an exception for
distributions “attributable to the employee’s being disabled
within the meaning of subsection (m)(7)”. Section 72(m)(7)
provides:
(7) Meaning of disabled.-- For purposes of this
section, an individual shall be considered to be
disabled if he is unable to engage in any substantial
gainful activity by reason of any medically
determinable physical or mental impairment which can be
expected to result in death or to be of long-continued
and indefinite duration. An individual shall not be
considered to be disabled unless he furnishes proof of
the existence thereof in such form and manner as the
Secretary may require.
The determination of whether a taxpayer is disabled is made
with reference to all the facts of the case. Sec. 1.72-
17A(f)(2), Income Tax Regs. The regulations also set forth
general considerations upon which a determination of disability
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Last modified: May 25, 2011