Richard D. Smart - Page 5

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          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,           






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