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Pursuant to section 408(d)(3), a distribution to the
individual for whose benefit an IRA is maintained is excluded
from gross income if the entire amount is paid into an IRA, an
individual retirement annuity, or an eligible retirement plan for
the benefit of the same individual within 60 days.
Petitioner concedes that he knew that there is a 60-day
requirement to make a nontaxable rollover. Petitioner testified
that his intent, however, was not to roll over the distribution.
Petitioner wanted to transfer the distribution into a type of
retirement investment that would permit him to take the funds out
as a loan and not as a taxable distribution.
Regardless of petitioner’s intent, the distribution is
treated as income unless it complies with the 60-day rollover
requirement under section 408(d)(3)(A) or with another exception
enumerated under section 408(d). It was approximately 5 months
from petitioner’s receipt of the distribution before he deposited
$41,000 of the original $50,000 distribution into an IRA. The
distribution is income because petitioner did not make a rollover
into an IRA of any of the distribution within the 60-day period
required by section 408(d)(3)(A), and no other exceptions apply.
Moreover, the distribution is subject to a 10-percent
additional tax under section 72(t)(1) for early withdrawal since
petitioner stipulated that none of the exceptions under section
72(t)(2) applies.
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Last modified: November 10, 2007