Michael J. Kulzer & Jan K. Bielman-Kulzer - Page 6




                                         -5-                                          
               Distributions made as part of a series of substantially                
               equal periodic payments (made at least annually) for                   
               your life (or life expectancy) or the joint lives (or                  
               joint life expectancies) of you and your designated                    
               beneficiary (if from an employer plan, payments must                   
               begin after separation from service).                                  
               During 2003 petitioners received a distribution of $36,439             
          from OCTFCU.  Petitioner claims that petitioners retained $12,000           
          of that amount and rolled over the remainder, $24,439, to another           
          retirement account.  During 2004 petitioners received a                     
          distribution of $70,000 from Pershing, LLC.  Mr. Kulzer claims              
          that petitioners retained $12,000 of that amount and rolled over            
          the remainder, $58,000, to another retirement account.  Finally,            
          during 2005 petitioners received a distribution of $17,000, but             
          the record does not disclose the payor of that distribution.                
               As stated above, the sole issue is whether the distribution            
          of $25,000 from petitioner's IRA account with OCTFCU, which is              
          reported on petitioners' return for taxable year 2002, is subject           
          to the 10-percent additional tax imposed by section 72(t)(1) on             
          early distributions from qualified retirement plans.  Petitioners           
          argue that the distribution is one of a series of substantially             
          equal annual payments made for petitioner's life expectancy and,            
          as such, is not subject to the additional tax, pursuant to                  
          section 72(t)(2)(A)(iv).  Petitioners concede that if the subject           
          distribution does not qualify for the exception provided by                 
          section 72(t)(2)(A)(iv), then it is subject to the 10-percent               








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