Wayne Smith - Page 12



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          the portion of such amount which is includable in gross income.”            
               Section 72(t)(2) further provides:                                     
               Paragraph [72(t)(1) shall not apply to any of the following            
          distributions:                                                              
                    (A) * * * Distributions which are--                               
                              (iv) part of a series of substantially equal            
                         periodic payments * * * or                                   
               *      *      *      *      *      *      *                            
                              (vii) made on account of a levy under section           
                         6331 on the qualified retirement plan.                       
               Section 72(t)(4) provides:                                             
                    (A) In general.  If–-                                             
                              (i) paragraph (1) does not apply to a                   
                         distribution by reason of paragraph (2)(A)(iv),              
                         and                                                          
                              (ii) the series of payments under such                  
                         paragraph are subsequently modified (other than by           
                         reason of death or disability)-                              
                                   (I) before the close of the 5-year                 
                              period beginning with the date of the first             
                              payment and after the employee attains age              
                              59-1/2, or                                              
                                   (II) before the employee attains age 59-           
                                   1/2,                                               
                    the taxpayer’s tax for the 1st taxable year in which              
                    such modification occurs shall be increased by an                 
                    amount, determined under regulation, equal to the tax             
                    which (but for paragraph (2)(A)(iv)) would have been              
                    imposed, plus interest for the deferral period.                   

               Petitioner’s argument is premised on his belief that section           
          72(t)(4)(A), which applies the aforementioned recapture tax when            
          a taxpayer modifies an existing series of substantially equal               
          payments, supersedes the exception to the 10-percent additional             
          tax provided in section 72(t)(2)(A)(vii), in cases where the                






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