- 4 - includable in the distributee’s gross income in the year of distribution under the provisions of section 72. Secs. 61(a)(11), 402(a); see secs. 401(a), 4974(c)(1). Such distributions made prior to a taxpayer’s attaining the age of 59� that are includable in income are generally subject to a 10- percent early withdrawal tax unless an exception to the tax applies. Sec. 72(t)(1). The section 72(t) additional tax is intended to discourage premature distributions from retirement plans. Dwyer v. Commissioner, 106 T.C. 337, 340 (1996); see also S. Rept. 93-383, at 134 (1973), 1974-3 C.B. (Supp.) 80, 213. Being debt free is a laudable financial goal. Regrettably, no exception applies for that purpose; the money petitioner used to pay off his personal debts remains subject to the 10-percent additional tax. While petitioner’s hard work enabled him to retire a bit early, the tax code is sometimes unforgiving in its attempts at standardization. Section 72(t)(2)(F) does exempt distributions from the early withdrawal tax to the extent such distributions are qualified first-time homebuyer distributions. However, the maximum amount of a distribution that may be treated as a qualified first-time homebuyer distribution is $10,000. See sec. 72(t)(8)(B). Therefore, only $10,000 of the approximately $30,000 petitioner used to acquire his first home would be eligible for relief from the additional 10-percent tax under the exception, if applicable,Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011