-7-
or disability) within 5 years of the date of the first payment
or, if later, before the employee attains age 59-1/2. In that
event, section 72(t)(4) provides that the exception to the 10-
percent additional tax set forth in section 72(t)(2)(A)(iv) does
not apply and the taxpayer's tax for the year of the modification
shall be increased by an amount which is equal to the amount
which would have been imposed, plus interest for the deferred
period.
In Rev. Rul. 2002-62, 2002-2 C.B. 710, the Internal Revenue
Service promulgated further guidance about what constitutes a
series of substantially equal periodic payments, within the
meaning of section 72(t)(2)(A)(iv). It states that payments will
be considered to be substantially equal periodic payments if they
are made in accordance with one of the three methods described in
Notice 89-25, Q&A-12: The required minimum distribution method,
the fixed amortization method, or the fixed annuitization method.
Rev. Rul. 2002-62, sec. 202(d), 2002-2 C.B. at 711,
describes how to determine the account balance used to determine
periodic payments, as follows:
(d) Account balance. The account balance that is used
to determine payments must be determined in a
reasonable manner based on the facts and circumstances.
For example, for an IRA with daily valuations that made
its first distribution on July 15, 2003, it would be
reasonable to determine the yearly account balance when
using the required minimum distribution method based on
the value of the IRA from December 31, 2002, to July
15, 2003. For subsequent years, under the required
minimum distribution method, it would be reasonable to
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