-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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Last modified: March 27, 2008