Eugenie Denise Mitchell - Page 5

                                        - 5 -                                         
          not, at the time of the contributions, treated as taxable income            
          to the employees.                                                           
               However, distributions from the annuity accounts to the                
          employees are treated as taxable income to the employees in the             
          year of the distributions.  Sec. 403(b)(1) (flush language);                
          sec. 72(a).                                                                 
               As indicated, respondent takes the position that the $15,422           
          petitioner received from her annuity accounts prior to petitioner           
          attaining the age of 59-1/2 is also subject under section 72(t)             
          to a 10-percent additional tax.                                             
               Petitioner argues that the distributions she received from             
          her annuity accounts are governed not by section 72(t) but by               
          section 72(q), under the latter of which no 10-percent penalty or           
          additional tax would apply to the early distributions petitioner            
          received.1                                                                  
               However, as a result of the section 72(t)(1) cross-reference           
          to section 4974(c), annuity accounts established and funded by              
          section 501(c)(3) organizations are explicitly covered by section           
          72(t), and early distributions from such annuity accounts are               
          generally subject to a 10-percent additional tax.  In its                   


               1 Under the sec. 72(q)(2)(E) cross reference to subsec.                
          72(e)(5)(D), early distributions from annuity accounts                      
          established and funded by sec. 501(c)(3) organizations are                  
          excepted from the application of the sec. 72(q) 10-percent                  
          penalty provided therein on early distributions.  See sec.                  
          72(e)(5)(D)(ii)(III).                                                       





Page:  Previous  1  2  3  4  5  6  7  8  Next

Last modified: May 25, 2011