§72 — Annuities; certain proceeds of endowment and life insurance contracts

Held, further, R's objections to Ps' proffered expert testimony are overruled; the expert testimonywill be admitted into evidence.

With respect to the longevity of these regulations, the Supreme Court has stated that long-standing rules should not be overruled except for weighty reasons.

IRA Distributions Section 61(a) provides that “gross income means all income from whatever source derived.” Section 408(d)(1) provides that any amount paid or distributed out of an IRA is included in the gross income of the payee or distributee in the manner provided under section 72. The general rule of section 408(d)(1) does not apply to a rollover contribution, transfers incident to divorce, or distributions for charitable purposes.

Additional tax under section 72(t) For 2013 respondent determined that petitioner is liable for an additional tax of $430 under section 72(t). Section 72(t)(1) imposes a 10% additional tax on the taxable amount of an early distribution from a qualified retirement plan (as defined in section 4974(c)). A distribution is early if it is made before the recipient attains the age of 59-1/2. § 72(t)(2)(A)(i). However, the 10% additional tax does not apply to certain distributions, such as those attribu

- 13 - [*13] Section 72(t) imposes an additional 10% tax on early distributions from a qualified retirement plan, including an IRA, made to a taxpayerbefore she attains the age of59½. See secs. 72(t)(1), (2)(A)(i), 4974(c)(4). Mrs. Gebman had not attained the age of59½ when she received the distributions at issue. The IRA distributions were therefore an early distribution subject to the additional 10% tax. The additional 10% tax, however, does not apply ifcertain enumerated exceptions are satisf

- 13 - [*13] Section 72(t) imposes an additional 10% tax on early distributions from a qualified retirement plan, including an IRA, made to a taxpayerbefore she attains the age of59½. See secs. 72(t)(1), (2)(A)(i), 4974(c)(4). Mrs. Gebman had not attained the age of59½ when she received the distributions at issue. The IRA distributions were therefore an early distribution subject to the additional 10% tax. The additional 10% tax, however, does not apply ifcertain enumerated exceptions are satisf

- 14 - Section 72(t) imposes an additional 10% tax on early distributions from a qualified retirement plan, including an IRA, made to a taxpayerbefore he attains the age of59½. See secs. 72(t)(1), (2)(A)(i), 4974(c)(4). Petitioner had not attained the age of59½ when he received the distribution at issue. The IRA distribution was therefore an early distribution subject to the additional 10% tax. The additional 10% tax, however, does not apply for certain enumerated exceptions.

Additional Tax Under Section 72(t) Section 72(t) imposes an additional 10% tax on early distributions from a qualified retirement plan. See sec. 72(t)(1). The additional 10% percent tax, however, does not apply to certain enumerated distributions.

- 10 - under section 72(t).° Petitioner was 60 years old when he received the Forethought distribution; therefore, the additional tax under section 72(t) does not apply.

The Court made clear in Gee that once the assets in the decedent's IRA were transferred into the taxpayer's IRA, any subsequent distributions were no longer occasioned by the decedent's death and were not made to the taxpayer as a beneficiary ofthe decedent; therefore, the exception under section 72(t)(2)(A)(ii) did not apply. The cases Gee and Sears control here, and the exception in section 72(t)(2)(A)(ii) does not apply.¹8 Therefore, the Court finds that petitioner is liable ¹8The Court notes

Their assertion that section 72 is inapplicable because they intended to use the annuity as an "invest- ment vehicle" rather than as a source ofretirement income is without merit.

ns into his Wells Fargo account.5 But a subsequent IRS levy on that account obviously does not establish that there was "a levy under section 6331 on the qualified retirement plan" or that the distributions from State Street to petitioner were "made on account ofa levy" within the meaning ofsection 72(t)(2)(A)(vii). Because the levy exception is inapplicable, and because petitioner does not contend that any other exception in section 72(t)(2) has relevance here, we conclude that the 10% addition

72(t)(2)(A)(i). However, the 10% additional tax does not apply under certain circumstances.

Additional 10% Tax for Early Withdrawal Section 72(t)(1) imposes an additional tax on an early distribution from a qualified retirement plan equal to 10% ofthe portion ofthe amount that is includable in gross income. The 10% additional tax does not apply to distributions: (1) to an employee age 59-1/2 or older; (2) to a beneficiary (or the employee's estate) on or after the employee's death; (3) on account ofthe employee's disability; (4) as part ofa series ofsubstantially equal periodic payment

Rollover Contributions Under Section 408(d)(3) In general, any amount paid or distributed out ofan individual retirement plan is included in the gross income ofthe payee or distributee as provided in section 72. Sec. 408(d)(1); Arnold v. Commissioner, 111 T.C. 250, 253 (1998). This general rule does not apply to a rollover contribution.

Section 72 (t) (1) provides that "If any taxpayer receives any amount from a quali ied retirement plan * * *, the taxpayer's tax * * * shall be increased by an amount equal to 10 percent of the portion of such amount which is includable in gross income . "* The $26, 995 distribution was received by George R. Ward, not Victoria J. Ward. He does not dispute that the distribution was from a qualified retirement 'The additional tax does not apply to distributions made to taxpayers who are more than

Section 72(t) Additional Tax` ' Respondent asserts that petitioner'is liable for $527 of, additional tax; on an early retirement" plan, .distribution pursuant to section 72 (t) . The notice of deficiency,' .however, reflects no 9No :.policy has been offered into evidence . '°Although petitioner,, has not expressly raised .this .issue we also note that the exception under sec . 105(c) does not apply .

72(t') for an early withdrawal from a qualified retirement plan. Respondent has since acknowledged that sec. 72(t) does not apply and petitioner is not liable for the $1,334 additional deficiency.

- 30 - circumstances, the section 72(t) additional tax does not apply to distributions made to!cover the costs ;of medical care or of higher education expenses .

in section 72.(p) (2) (A) does not apply unless :, (1) The loan, by .

Exclusion Provisions of Sections 104 and 10 5 Section 72 applies to "a pension plan * * * which provides for the payment of pensions at retiremen and the payment of an earlier pension in the event of permanen disability ." Sec . 1 .72-15(a), Income Tax Regs . However, s ction 72 does not apply to any amount received as an accident or health benefit, and the tax treatment of any such amount is determined under sections 10 4 z( .

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 .

61(a)(9), (11), 72(a) . Generally, however, section 72 does not apply to any amount received as an accident or health benefit, sec .

There is no economic hardship exception to the 10-percent additional tax - 7 - under section 72(t) . The 10-percent additional tax imposed on early distributions from a QRP does not apply, however, to distributions from an individual retirement plan used for higher education expenses to the extent such distributions do not exceed the amount of qualified education expenses of the taxpayer for the taxable year .

Section 72(t) Section 72 ( t) provides for a 10-percent additional tax on early distributions from a qualified retirement plan. However, the 10-percent additional tax does not apply to certai n distributions .

72(t)(1), 401(a), (k) (1) , 4974(c)(1), (4) and (5) . The 10-percent additional tax imposed on early distributions from qualified retirement plans does not apply to distributions from an individual retirement plan used for higher education expenses of the taxpayer for the taxable year .

72(p)(2)(A). Respondent’s determination that the $7,089.95 is includable in petitioner’s gross income for 2001 is sustained. IV. Additional 10-Percent Tax for Early Withdrawal Section 72(t)(1) imposes an additional tax on an early distribution from a qualified retirement plan equal to 10 percent of the portion of the amount which is includable in gross income. The 10-percent additional tax does not apply to certain distributions: (1) To an employee age 59-1/2 or older; (2) to a - 13 - beneficia

- 7 - Generally, any amount "paid or distributed out of" an IRA i s includable in gross income by the taxpayer in the manner provided under section 72 . Sec . 408(d)(1) . Pursuant to section 408(d)(4), this general'rule does not apply to the distribution of any contribution paid during a taxable year to an IRA if : (A) such distribution is received on or before the day prescribed by law (including' extensions of time) for filing such individual's return for such taxable year, (B) no deduction is

10-Percent Additional Tax on Early Distributions Section 72(t)(1) imposes an additional 10-percent tax on that portion of a distribution from a qualified retirement plan that is includable in the taxpayer’s gross income. The 10- percent additional tax does not apply to certain distributions as set forth in section 72(t)(2).

Commissioner, supra, is alas distinguishable from petitioners’ situation. As alluded to previously, cases decided under former section 72(m)(5), which did not contain a detailed list of exceptions comparable to present section 72(t), provide little authority for departure from the current legislative - 11 - scheme.

Petitioner contends that the additional tax under section 72(t) does not apply to distributions from profit sharing plans.

Generally, section 72(t)(1) imposes an additional tax on early distributions from qualified retirement plans. That additional tax is 10 percent of the portion of the plan distribution includable in gross income. There are certain distributions to which the section 72 additional tax does not apply, one of which is with respect to distributions on or after the date the recipient taxpayer attains the age of 59-1/2.

The IRA Distribution13 Generally, any amount paid or distributed out of an IRA is includable in the recipient’s gross income as provided in section 72. Sec. 408(d)(1); sec. 1.408-4(a), Income Tax Regs. This rule does not apply, however, to any amount distributed from an IRA to the individual for whose benefit the account is maintained if the entire amount is paid into an IRA for the benefit of such individual not later than 60 days after the distribution.

Section 72(t)(1) Additional Tax Respondent determined that the distributions made to petitioner out of his IRA’s were subject to the 10-percent additional tax on early withdrawals from an IRA imposed by section 72(t).8 Section 72(t)(1) imposes a 10-percent additional tax on early distributions from qualified retirement plans. A qualified retirement plan includes an IRA. Secs. 408(a), 4974(c)(4). Section 72(t)(2)(A) lists the types of distributions to which the additional tax does not apply.

8 Because petitioner failed to substantiate any expenses for education for 2011, we need not decide whether Adobe's online certification training program constitutes an "eligible educational institution" under secs.

Because the relevant facts are undisputed and only a legal issue remains, we need not decide who bears the burden ofproofon this issue.

Thus, we are not convinced that the phrase "investment in the contract" as defined in section 72 is an established term ofart that applies throughout the Code.

In contrast, NSSE Tier 1 and Tier 2 benefits are taxed under section 72 in the same manner as section 401(a) qualified plan distributions.

Taxation of Annuities Under Section 72 Lastly, petitioners contend that distributions from the SPIAs should be taxed under section 72, which sets forth general rules for the taxation of annuities.

Accordingly, we hold petitioner is liable for the additional 10% tax imposed by section 72(t).

Soltani-Amadi's section 401(k) retirement plan, nor did they treat the distribution as an early distribution from a retirement plan or report additional tax pursuant to section 72(t).

McEnroe's NYCERS retirement plan was a qualified plan under section 401(a), any amount actually distributed to him normally would be subject to Federal income tax pursuant to section 72.

We hold that the $28 rollover fee that was debited directly from Mr.

Accordingly, we hold that petitioners are entitled to exclude from gross income $86 ofthe $28,937 NYCERS annuity payment for each ofthe taxable years 2009 and 2010.

Respondent also determined that petitioner was liable for a 10% additional tax of $2,006 pursuant to section 72(t).

QP Deemed Distributions Section 402(a) provides generally that, pursuant to section 72, distributions from a QP are taxable to the distributee for the taxable year ofthe distribution.

The $237,897.25 was received before Kenneth Mallory's death, and therefore section 72 governs its tax treatment.

Respondent contends that ERS is a qualified employerplan and that distributions from petitioner's ERS retirementplan account are taxable under section 72.

On the basis ofthe foregoing, we hold that petitioner is not a distributee or payee within the meaning ofsection 408(d)(1) because the IRA distribution 18We express no opinion as to whether petitioner's failure to exercise available remedies under Washington law resulted in a constructive distribution from the IRA accounts in a later t

e, but only to the extent that it exceeds the investment in the contract.3 In conjunction with the foregoing, section 1.72- 11(b)(1), Income Tax Regs., provides: Ifdividends (or payments in the nature ofdividends or a return of premiums or other consideration) are received under a contract to which section 72 applies and such payments are received before the annuity starting date or before the date on which an amount is first received as an annuity, whichever is the later, such payments are incl

The Court agrees with respondent that section 108 is not relevant and that section 72 provides the touchstone for decision.

shall be treated as the distributee of any distribution ofpayment made to the alternate payee under a qualified domestic relations order (QDRO).3 Section 402(a) provides that amounts distributed from employee trusts are taxable to the distributee "Except as otherwise provided in this section", and section 72 provides that "Except as otherwise provided in this chapter gross income includes any amount received as an annuity * * * under an * * * endowment, or life insurance contract."4 Nowhere in s

pursuant to section 72(t)(1) V .

We hold that the distributions are FINDINGS OF FACT Some of the facts have `been' stipulated an d The stipulations are incorporated herein by this reference .

We hold that petitioner is, required to report the partnership income .

The two remaining issues are : ( 1) Whether petitioners ' income as a result of the termination of a variable life insurance policy should b e SERVED DEC 1 4 2009 - 2 - characterized as income from a life insurance contract pursuant to section 72(e) or income from the discharge of indebtedness ; and (2) whether petitioners' income, if derived from the discharge of indebtedness, should be excluded from their gross income pursuant to section 108(g) .

Accordingly, we hold that in .accordance with section 72(a) petitioners' IRA distributions of $4,081 are includable in their, gross income for 2002 .

The issues for decision are : (1) To what extent proceeds of a loan petitioner took from his employer-provided pension plan pare taxable in 2005 ; and (2) whether petitioner is liable for th e 10-percent additional tax pursuant to section 72(t) on a deeme d distribution (cid:127)2 IJ, Background t, k Some of the facts have been stipulated, and we incorporate the stipulation and accompanying exhibits by this reference .

After a concession by petitioners,2 the issues for decision are : (1) Whether petitioners are liable for the 1 .0-percent penalty pursuant to section 72(q) on a premature distribution from an annuity contract, and (2) whether petitioners are liable for an accuracy-related penalty due to negligence .

10-percent additional tax under section 72(t) on early distributions from an individual retirement account (IRA) .' The sole issue-for decision is whether a distribution for qualified higher education expenses is an impermissible modification of a series of substantially equal periodic payments : .We hold that a distribution for qualified higher education expenses is not a .modification of a series of substantially equal periodic payments .

We hold that petitioner's depression does not qualify as a disability under section 72(t) or as reasonable cause for purposes of the additions to tax .

After concessions,' the issue for decision is whether petitioners are liable for the 10-percent additional tax pursuant to section 72(t) with respect to an early distribution from a retirement account in 2004 .

The Kaiser USWA ESOP is a qualified stock bonus plan, see the Kaiser Aluminum'USWA Employee Stock Ownership Plan Summary, supra , and thus is a "qualified retirement plan" pursuant to section 72 (t) .

In particular, and as pertinent to this case, section 1 .72- 11(d)(1), Income Tax Regs., provides Any amount received upon the surrender, redemption, or maturity of a contract to which section 72 applies, which is not received as an annuity under the rules of paragraph (b) of § 1 .72-2, shall be included in the gross income of the recipient to the extent that it, when added to amounts previously received under the contract and which were excludable from the gross income of the recipient under th

In addition, .a taxpayer who receives a distribution from a qualified retirement plan before attaining the age of 59-1/2 is generally subject to an additional 10-percent tax pursuant to section 72(t)(1 .) on the amount 'of the distribution unless the' taxpayer can.

Pursuant to section 72, amounts distributed from a Keogh account are included in gross income in the year of receipt .

401(k) account, are taxable under section 72 and are an example of IRD .

In the notice of deficiency, respondent determined that petitioner was liable for the 10-percent additional tax on the early $116,251 .20 distribution (hereinafter the distribution) from his 401(k) plan pursuant to section 72(t) .

Although section 72 provides exceptions.

Accordingly, distributions under the CWU retirement plan are taxable under section 72.

We hold that they are .

We hold that they are not.

This amount represented a 10-percent additional tax on an early IRA distribution pursuant to section 72(t).

Does section 4975 apply to a loan even though such loan, pursuant to section 72(p), was treated as a distribution?

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

Respondent also determined that each petitioner was liable for a - 10 - 10-percent additional tax pursuant to section 72(t) for early distributions from qualified retirements plans.5 OPINION Generally, distributions from qualified retirement plans are includable in the distributee's income in the year of distribution as provided in section 72.

pension plan as provided for in section 401(a). The taxation of the distributee of such a plan is governed by section 402(a). Section 402(a) provides that the amounts distributed under a section 401(a) plan shall be taxable to the distributee under section 72. Section 72 provides in general that amounts received under an annuity contract are includable in gross income except to the extent that such amounts are considered to be a reduction or return of consideration paid. Specifically, section 7

15 does not govern transfers to CRATs because it does not specifically mention them is meritless. Nothing in the text of the provision excludes CRATs from its scope. The Gerhardts also seek shelter in the rules governing the taxation of annuities in section 72. But, if one respects the form of the transactions the Gerhardts chose, the Gerhardts did not buy any annuities from Symetra. The CRATs did so and directed how payments under the annuities were to be made.38 Thus, any amounts paid by 36 Th

Thus, subject to certain exceptions, see, e.g., § 402(c)(1) (excluding certain “rollover” distributions from income), any amount actually distributed to petitioners normally would be subject to federal income tax pursuant to section 72, see § 402(a). Mr. Ghaly requested the withdrawal resulting in the $71,147 distribution from his Great-West retirement account. Mr. Ghaly also defaulted on the outstanding loan from his Great-West retirement account, which resulted in a deemed distribution of $44,

- 9 - Section 72(t)(1) imposes a 10% additional tax on the taxable amount of an early distribution from a qualified retirement plan (as defined in section 4974(c)). The term “qualified retirement plan” includes a section 401(k) plan and an ESOP. Uscinski v. Commissioner, T.C. Memo. 2005-124, 2005 Tax Ct. Memo LEXIS 123, at *6; see also secs. 72(t)(1), 401(a), (k)(1), 4974(c)(1), 4975(e)(7). A distribution is early if it is made before the recipient attains the age of 59-1/2. Sec. 72(t)(2)(A)(i).

Amounts paid or distributed out ofan IRA are "included in gross income by the payee or distributee * * * in - 10 - [*10] the manner provided under section 72." Sec. 408(d)(1). And while neither the statute nor the regulations define the terms "payee or distributee", we have said: "Generally, the payee or distributee ofan IRA is the participant or beneficiary who is eligible to receive funds from the IRA." Roberts v. Commissioner, 141 T.C. 569, 576 (2013). In some cases the general rule is inapp

72; Montgomery v. United States, 18 F.3d 500 (7th Cir. 1994). The employing agency withholds a mandatory contribution from the employee’s salary, and that withheld amount is after-tax income because it is taxable for the year in which it is withheld. Malbon, 43 F.3d at 467. On distribution that portion is nontaxable because it was already subj

10-Percent Early Withdrawal Additional Tax Section 72(t) (1) imposes a 10-percent additional tax on any distribution from a qualified retirement plan that fails to satisfy one of the statutory exceptions in section 72(t) (2). Dollander v. Commissioner, T.C. Memo. 2009-187.4 Petitioners argue that the exception under section 72(t) (2) (A) (iii) applies, which provides that the 10-percent additional tax shall not apply to a distribution "attributable to the employee's being disabled 4The 10-percen

- 14 - amounts is governed by the general rule of section 72(e) (2)," and, if applicable, the special rule of section 72(e) (5). The special rule of section 72(e) (5) governs amounts received.under a life insurance contract. Sec. 72 (e) (5) (C). Here, the amount was received before Mr. Brown's death, so section 72 governs its tax treatment. The amount was not received as an annuity, so section 72(e)--not section 72(a)-- governs its tax treatment. And the amount was received under a- life insuran

72(p); see also sec. 1.72(p)-1, Q&A-4, Income Tax Regs. The relevant exception is section 72(t)*(2) (A) (iii),5 which provides that the 10-percent additional tax shall not apply to a distribution "attributable to the employee's being disabled within the meaning of subsection (m) (T)". Section 72(m) (7) provides that for purposes of section 72: an individual shall be considerec to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically deterninable phy

Additional Tax Under Section 72(t) Section 72(t) (1) imposes an additional tax on an early distribution from a qualified retirement.plan equal to 10 percent of the portion of such distribution that is includable in gross income.' As previously discussed, failure to make an installment payment when due in accordance with the terms of a loan from a qualified retirement plan may result in a taxable distribution. Sec. 72(p) (1). Accordingly, a loan balance that constitutes a taxable distribution is

Section 402(b) (2) provides that "the amount actually distributed" or made available to a distributee by a nonexempt employee trust shall be taxable in the year distributed or otherwise made available to the 11- beneficiary as provided by section 72. See also sec. 1.402(b)- 1(c) (1), Income- Tax Regs. Section 72(e) prescribes rules for the tax treatment-of amounts received under a life insurance contract which are not received as annuities. In general, any nonannuity amount received before the

10-Percent Early Withdrawal Additional Tax Section 72(t) (1) imposes a 10-percent additional tax on any distribution from a qualified retirement plan that fails to satisfy one of the statutory exceptions in section 72(t) (2). Dollander v. Commissioner, T.C. Memo. 2009-187.4 Petitioners argue that the exception under section 72(t) (2) (A) (iii) applies, which provides that the 10-percent additional tax shall not apply to a distribution "attributable to the employee's being disabled 4The 10-percen

Early Distribution Pursuant to Section 72(t ) -Generally, amounts distributed from "a qualified retirement, plan (as defined in section 4974(c))" are includable in gross income as provided in section 72 . .. .Sec . .408 (d) .(1) . a A 10-percent additional tax is imposed under section 72(t)-on any distribution that fails to satisfy .one_of theexceptions for premature distributions -as provided :in section 72 (t) (2) . This Court .has° consistently held that its bound"by..the .list of statutory e

ions Under Section 402(a) Section 402(a) provides: Except as otherwise provided in this section, any amount actually distributed to any distributee by an employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the dis-tributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities).

Section 72(t)(2)(E) provides the exception to the 10-percent additional tax on early distributions from retirement plans for 13 - higher education expenses defined under section 72 ( t)(7), which" in turn incorporates section 529 (e) . Respondent argues that transportation costs are not included in the definitions of qualified expenses in section 72(t)(7 ) or 529 (e)(3) and, in any event, petitioner has not proven the amount of transportation expenses he actually incurred'. Petitioner wishes to

The .relevant text of section 72(q)(2) is clear ; nothing therein contains either : (1) An exception for higher education expenses, or (2) a provision that,the exception found in section 72(t)(2)(E) applies to the 10-percent penalty under section 72 (q) (1) . Section 72(t)(2)(E) specifically limits its reach to the 10- percent additional tax on distributions from qualified retirement plans under section 72(t)(1), and we have held that the higher education expense exception found in section 72(t)

4 4 - were part of a series of substantially equal periodic payments and, as such, are not subject to,the additional tax pursuant to section 72(t) (2) (A) (iv) . Discussion In general, the Commissioner's determination as set forth in the notice of deficiency is presumed correct, and the taxpayer bears the burden of proving that the determination is in error . See Rule 142(a) ; Welch v . Helvering, 290 U .S . 111, 115 (1933) . Pursuant to section 7491(a), the burden of proof as to factual matters

7 - Section 72(t)(4)4 provides that the-exception found in section 72(t)(2)(A)(iv) is not applicable if the series of substantially equal periodic payments is subsequently modified (other than by reason of death or disability) before the employee attains age 59-1/2 . However, respondent is not seeking the 10-percent additional tax for 2001, 2002, or 2003 in an amount greater than reported on petitioner's income tax return as a consequence of the section 72(t)(4) recapture provision . Petitioner

Thus, pursuant to section 72(p)(1)(A), a $31,176 .99 distribution is deemed to have been made in 2004 . Section 402(a) provides generally that distributions from a qualified plan are taxable to the distributee in the taxable year in which the distribution occurs, pursuant to the provisions of section 72, and thus the $31,176 .99 deemed distribution was taxable in 2004 . B . 10-Percent Additional Tax Section 72(t) imposes an additional tax on a distribution from a qualified-retirement plan made p

ny taxpayer receives any amount from a qualified retirement plan * * * the taxpayer's tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of - 11 - 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 equa l periodic pay

72(m)(7) . Petitioner offered a medical benefits card issued by the Veterans' Administration and some brief testimony, neither of which rises to a level sufficient to meet the standard required by the Internal Revenue Code . See sec . 72(m)(7) ; Tokarski v . Commissioner , 87 T .C . 74, 77 (1986) . Petitioner also claimed "this Tax Court has previously ruled on my late filings and accepted my disability ." But the issue of petitioner's disability has never been litigated and decided by this Cour

This includes items included under section 72 (relating to annuities and retirement accounts) .

are rounded to the nearest dollar . ERV _ -OCT - 9 2007 -2- concessions ,2 the issue for decision is whether $3,480 in taxable distributions from petitioners ' s individual retirement account (IRA) is subject to the 10-percent additional tax under section 72 (t) . FINDINGS OF FACT Petitioner resided in Alexandria, Virginia, when the petition was filed . Petitioner was born in 1951 . In 2003, he received $21,950 in distributions from an IRA . Petitioner used the proceeds during 2003 to help pay

asis, or cite any authority, for their conclusion that they are not subject to tax on the distributions from Mr . Kopty's account at Norwest . The general rule is that any amount "paid or distributed out of" an IRA is subject to tax as prescribed by section 72 . See sec . 408(d)(1) . Petitioners seem to be arguing that Mr . Kopty's -20- Norwest account is disqualified from being an IRA because it was funded by an excess contribution . To the contrary, an IRA is not necessarily disqualified by th

- 11 - Distributions from qualified plans such as the ERS are generally treated as annuities and subject to tax to the extent provided in section 72. Sec. 402(a). Section 72(a) generally requires any amount received as an annuity to be included in gross income. Section 72(b) allows an exclusion by permitting the use of an exclusion ratio to except from gross income amounts proportionate to the taxpayer’s investment in the contract. Section 72(c), as relevant here, defines the investment in the c

Section 72(r)(1) provides that for income tax purposes, Tier 2 railroad retirement benefits are treated “as a benefit provided under an employer plan which meets the requirements of section 401(a).” Section 401(a) pensions are treated as annuities and are taxable under section 72. Sec. 402(a). Section 72(a) generally requires that any amount received as an annuity be included in gross income. Under section 72(b) “Gross income does not include that part of any amount received as an annuity * * *

Tax Treatment of Early IRA Distributions Section 408(d)(1) provides that any amount paid or distributed out of an individual retirement plan shall be included in gross income by the distributee in the year of distribution in the manner provided under section 72. An IRA is included in the definition of an individual retirement plan. Sec. 7701(a)(37). Petitioners properly reported the entire $25,000 distribution from their IRA as income on their 2001 return. Section 72(t)(1) imposes an additional

- 6 - Although a loan may initially satisfy the requirements of section 72(p)(2)(A) at the time that it is made, a deemed distribution may nevertheless occur subsequently because of the failure to repay the loan consistent with the loan agreement, e.g., because of the failure to amortize the loan on a substantially level basis. Sec. 72(p)(2)(C). Accordingly, if a default occurs, a distribution is deemed to occur at that time in the amount of the then outstanding balance of the loan.3 In the pres

For purposes of section 72, an employee is disabled if she is “unable to engage in any substantial gainful activity by reason of any medically determinable physical condition or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration.” Sec.

nal tax on the early distribution from the USAA SIP. OPINION Section 402(a) provides generally that distributions from a qualified plan are taxable to the distributee, in the taxable year of the distributee in which distribution occurs, pursuant to section 72. The amount of a distribution to a taxpayer from a qualified pension plan generally includes the proceeds of any loan from the plan to the taxpayer. See Scott v. Commissioner, T.C. Memo. 1997-507, affd. without published opinion 182 F.3d 91

The distribution is includable in gross income in the same manner as an annuity under section 72, id., unless the distribution qualifies for special tax treatment under section 402(d) or is excluded under another provision.

SERVED FEB 1 8 2004 - 2 - After a concession by petitioners,2 the issues for decision are:- (1) Whether petitioners realized gross income under section 72 from two annuity distributions; (2) whether petitioners are liable for the 10-percent penalty on premature distributions from nonqualified annuities under section 72(q);3 and (3) whether petitioners are liable for the 20-percent accuracy-related penalty for understatement of tax pursuant to section 6662(a).

Petitioner contends that the restrictions of section 72 did not apply to him. He asserts that he “wanted to test the envelope.” Petitioner said he’s “heard of people trying it and some getting away with it.” He also contends he is entitled, based on his retirement contributions, to a greater tax-free portion of the 1998 pension annuity distribution. In general, the determinations of the Commissioner in a notice of deficiency are presumed correct, and the burden is on the taxpayer to show that th

.-- (1) In general.--Except as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72. We have held that the distributee or payee of a distribution from an IRA is "the participant or beneficiary who, under the plan, is entitled to receive the distribution." Bunney v. Commissioner, 114 T.C. 259, 262 (2000); see also Darby v.

72(r)(1). Section 402(a) provides that such benefits are subject to tax to the extent provided in section 72, which relates to annuities. Section 72(a) generally requires any amount received as an annuity to be included in gross income. Section 72(d), however, allows taxpayers to exclude the benefits which represent a return of their own investment in their employer’s plan. The method for recovery of investment provided for in section 72(d)(1)(B) excludes from gross income the amount of any mont

999 income tax return. OPINION A. Distributions from the Plan Section 402(a) provides generally that distributions from a qualified plan are taxable to the distributee, in the taxable year of the distributee in which distribution occurs, pursuant to section 72. Section 72(p)(1)(A) provides the general rule that proceeds of a loan from a qualified employer plan to a plan participant are treated as a taxable distribution to the 4 The first monthly payment reflected on the amortization was actually

Pursuant to that section, “any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72.” Neither the Code nor applicable regulations define the terms “distributee” or “payee” as used in section 408(d)(1).

s: (1) In general.--Except as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72. The term "individual retirement plan" in section 408(d)(1) includes an IRA. See sec. 7701(a)(37)(A). Section 402(e)(1)(A) on which petitioner relies does not operate as an exception to section 408(d)(1).3 Only an exception 3Even if it did,

ns which are-- * * * * * * * (iv) part of a series of substantially equal periodic payments (not less frequently than - 6 - annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary * * * Section 72(t)(4)3 dictates, however, that if the series of substantially equal periodic payments (which otherwise is excepted from the 10-percent tax) is subsequently modified (other than by reason of death o

Section 402(a) provides that "the amount actually distributed to any distributee by any employees' trust described in section 401(a) * * * shall be taxable to [the distributee], in the year in which so distributed, under section 72 (relating to annuities)." Section 72(p)(1)(A) provides generally that a loan from a qualified employer - 9 - plan to a plan participant or beneficiary is treated as a taxable distribution to the participant or beneficiary in the taxable year in which the loan is recei

ble for tax on his income from a veterinary practice and other sources for each of the years in issue; (2) whether petitioner is liable for self-employment tax for each of the years in issue; (3) whether petitioner is liable for additional tax under section 72 in 1989 for a premature distribution of $30,000 from an individual retirement account; (4) whether petitioner is liable for additions to tax under 1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect

impermissibly modified a series of substantially equal periodic payments so as to trigger the imposition of the 10-percent recapture tax under section 72(t)(4). Generally, amounts distributed from an IRA are includable in gross income as provided in section 72. Sec. 408(d)(1). Additionally, a 10-percent tax is imposed under section 72(t)(l) on any distribution that fails to satisfy one of the exceptions for premature distributions as provided in section 72(t)(2). Section 72(t)(2) states in perti

Section 1.72-15(b), Income Tax Regs., provides that, as a general rule, section 72 does not apply to any amount received as an accident or health benefit.

petitioner was not income when received because it was a loan of $10,000 or less. In general a loan from a qualified plan to a plan participant is treated as a distribution from the plan under section 72(p)(1), and therefore included in income under section 72. See sec. 402(a). However, section 72(p)(2)(A) provides an exception to the general rule for certain loans, and petitioner's loan appears - 12 - to have satisfied the basic requirements of the exception. Petitioners have presented no evide

2550.408b-1 are merely illustrative of those circumstances; they do not purport to limit the situations in which section 72 may apply or to describe the income tax consequences of loans from a qualified profit-sharing plan.

2550.408b-1 are merely illustrative of those circumstances; they do not purport to limit the situations in which section 72 may apply or to describe the income tax consequences of loans from a qualified profit-sharing plan.

case was hardly "voluntary"; however, we attach no significance to such a distinction. We consider the transfer to petitioner's spouse to constitute a distribution to petitioner. Distributions from an IRA are includable in income in accordance with section 72. Sec. 408(d). The distribution was not received by petitioner as an annuity; consequently, the provisions of section 72(e) are applicable. Consistent with the presumption of correctness applicable to respondent's determination, Welch v. He

2550.408b-1 are merely illustrative of those circumstances; they do not purport to limit the situations in which section 72 may apply or to describe the income tax consequences of loans from a qualified profit-sharing plan.

e pension plan exceeded $100,000. Section 402(a) provides that, with exceptions not here relevant, distributions from a qualified plan are taxable to the distributee, in the taxable year of the distributee in which distribution occurs, pursuant to section 72. Section 72(p)(1)(A) provides the general rule that loans from a qualified employer plan to plan participants or beneficiaries are treated as taxable distributions. Section 72(p)(2)(A), however, provides an exception to the general rule for

OPINION Savings Plan Distribution Under section 402(a) any distribution from any employees' trust described in section 401(a) that is exempt from tax under section 501(a) shall be taxable to the distributee in the year of distribution under section 72.2 Section 72(e) provides that the amount received is includable in gross income, except to the extent attributable to an individual's investment in the contract.

n IRA and, as such, was includable in petitioners' gross income for 1990 pursuant to sections 408(d)(1) and 72. OPINION Generally, any amount "paid or distributed out of" an IRA is includable in gross income by the taxpayer in the manner provided by section 72.5 Sec. 408(d)(1). As relevant herein, section 72(e)(2)(B) provides that amounts received before the annuity starting date are includable in income to the extent allocable to 4 Petitioners also filed an amended return (Form 1040X) for 1990;

. Petitioners disagree. Lump Sum Distribution Issue As a general rule, a distribution from a qualified plan, such as the Retirement System, is taxed to the recipient in the year distributed under the rules relating to annuities. Sec. 402(a)(1); see sec. 72. However, section 402(e)(1) provides a preferential forward averaging method of computing the tax on certain such distributions. The parties agree that petitioners are entitled to this preferential method of computing the tax on the Transfer R

Parties’ Contentions Petitioners argue that the phrase “investment in the contract” is defined in section 72 and that we should apply that meaning in interpreting section 402(b)(4)(A).

Section 402 provides that amounts actually distributed from a qualified plan are taxable to the distributee under section 72 in the year of distribution.

* * * Generally, under section 72, amounts distributed to the taxpayer from an IRA are includible in the taxpayer's gross income, see sec.

in this case, any amount paid or distributed out ofan IRA, such as Perry's IRA with Freedom Credit Union, is included in gross income by the payee or distributee in the year paid or distributed (and therefore taxable in such year) as provided under sec. 72 (relating to annuities). See secs. 408(d)(1), 7701(a)(37). In addition, with certain exceptions, none ofwhich apply in this case, a distribution from a qualified employer retirement plan, such as Perry's pension with the PSERS, is taxable to

scussion Gross income includes income from any source, including annuities, endowment contracts, and pensions. See secs. 61(a)(9), (10), (11), 72. - 5 - I. Plan Distribution The plan distribution is includable in petitioner's income as provided in section 72. See sec. 402(a). As noted, no portion ofthe plan distribution is included in the income reported on the return. According to petitioner, the plan distribution is excludable from his income because at the time ofthe distribution he was suffe

The parties do not dispute that ERS administers a qualified plan for purposes of section 72 and that petitioner participated in the qualified plan.

Under section 72, earnings accruing to cash value and annuity policies — often referred to as the “inside buildup”— are not currently taxable to the policyholder (and generally are not taxable to the insurance company). The cash value of the policy thus grows more rapidly than that of a taxable investment portfolio. The policyholder may access this value

own v. Commissioner, T.C. Memo. 2011-83, 2011 WL 1396936, aff'd, 693 F.3d 765 (7th Cir. 2012); Barr v. Commissioner, T.C. Memo. 2009-250. The tax treatment ofa distribution from a life insurance contract before the death ofthe insured is governed by section 72. Brown v. Commissioner, 2011WL 1396936, at *4-*6. As relevant herein, an amount received in connectionwith a life insurance contract that is not received as an annuity generally constitutes gross income to the extent that the amount receiv

Pursuant to section 402(a), amounts actually distributed from a trust described in section 401(a) are taxable to the "distributee" under section 72, which generally provides for the current.taxation of distributions as ordinary income.8 As a general rule the term "distributee" means the participant or beneficiary who is entitled to receive the distribution under the plan.

Generally, under section 72 amounts actually distributed from retirement accounts, such as 401(k) plans, are taxable income to the distributee in the taxable year in which they are distributed.

iency attributable to the allegedly erroneous filing status. See Rule 142(a)(1). II. Analysis Section 408(d)(1) provides that any amount paid or distributed out of an IRA is included in the gross income of the payee or distributee as provided under section 72. Generally, the payee or distributee of an IRA is the participant or beneficiary who is eligible to receive funds from the IRA. Bunney v. Commissioner, 114 T.C. 259, 262 (2000) (citing Darby v. Commissioner, 97 T.C. 51, 58 (1991)). However,

Under section 402(a), amounts distributed to a distributee by a qualified pension, profit-sharing, or stock bonus plan are taxable to the distributee (in this case, petitioner's former wife)under section 72 in the year ofthe distribution.

Section 402(a) provides that amounts distributed from employee trusts are taxable to the distributee “Except as otherwise provided in this section”, and section 72 provides that “Except as otherwise provided in this chapter gross income includes any amount received as an annuity * * * under an * * * endowment, or life insurance contract.” Nowhere in section 402(a) or section 72 is section 104(a) mentioned.

Such distributions must be included in the distributee's gross income pursuant to the annuity rules of section 72.4 See sec.

to section 72,(t) for an early distribution from a qualified retirement plan ; (4) whether petitioners are entitled to a filing status of married filing jointly; and (5) whether petitioners are liable for the additions 2A11 section references are to the Internal Revenue Code in effect for . the years in issue, and all Rule references are to the Tax Co

Petitioner's Disability Argument Petitioner further maintains he received the 2005 TSP distribution because he was disabled and that section 72 .(t)(2)(A)(iii) excepts distributions from a qualified retirement plan that are "attributable to the employee's being disabled within the meaning of subsection (m)(7) [of section 72]" .

ons. Respondent determined that the exception for qualified higher education expenses under section 72(t)(2)(E) applied to the remaining $35,221.50. Discussion In general, amounts distributed from an IRA are includable in gross income as provided in section 72. Sec. 408(d)(1). Section 72(t) provides for a 10-percent additional tax on early distributions from qualified retirement plans, unless the distribution falls within a statutory exception. Sec. 72(t)(l) and (2). Section 72(t)(2)(A)(iv) prov

In Gross Income A. 60-Day Requirement Petitioners stipulated that they received a SEP-IRA distribution of $25,000 in 2002 .3 Generally, a distribution from an IRA is includable in the distributee's income in the year of distribution as provided in section 72 . Sec . 408(d)(1) ; Schoof v . Commissioner, 110 T .C . 1, 7 (1998) . Section 408(d)(3) provides an exception to this rule for rollover contributions . To qualify as a rollover contribution, an IRA distribution must be rolled over pursuant

uctions for asserted expenditures related to his foundation, the Court concludes that he has not carried the burden of proving entitlement to any such deductions . 6 As a technical matter, sec . 402(a) provides that the distribution is taxable under sec. 72 . 8 - See Rule 142(a) ; INDOPCO, Inc . v. Commissioner , 503 U .S . 79, 84 (1992) .' In that regard, many of petitioner's claimed expenditures relate to taxable years other than 2002, the only taxable year at issue in this case . In addition,

gross income for the taxable year when received of the person who acquires the right to receive that amount. Sec. 408(d)(1) provides that distributions made from an IRA are included in the gross income of the distributee in the manner provided under sec. 72. 3The recipient of an item of IRD, such as the beneficiary of a decedent’s IRA, is allowed an income tax deduction equal to the amount of Federal estate tax attributable to the IRD. Sec. 691(c); Estate of Smith v. United States, 391 F.3d 621,

Section 72 pertaining to annuities and pensions (section 61(a)(9) and (11)) sets forth specific rules applicable to taxation of, inter alia, annuities and distributions from - 6 - qualified employer retirement plans. See also sec. 402(a). Section 72(a) reiterates the general rule of inclusion in gross income, unless otherwise provided. Section 72(

For purposes of section 72, if during any taxable year a participant receives directly or indirectly any amount as a loan from a qualified employer plan, such amount generally is to be treated as having been received by such individual as a distribu- tion from such plan.

Section 72 elaborates on section 61(a)(9) and (11) by providing specific rules applicable to taxation of, inter alia, annuities and distributions from qualified employer retirement plans. See also sec. 402(a). Section 72(a) reiterates the general rule of inclusion in gross income, unless otherwise provided. Section 72(b),6 however, provides otherwi

ed in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: * * * * * * * (9) Annuities; - 5 - Section 408(d)(1) provides that any amount paid or distributed out of an individual retirement plan must be included in gross income by the distributee in the manner provided under section 72,2 except as otherwise provided.

Section 402(a) provides in part: Except as otherwise provided in this section, any - 15 - amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities).

Respondent also concedes that the Bensons are not liable for the 10-percent penalty pursuant to section 72 of $2,600 for 1990.

Respondent also concedes that the Bensons are not liable for the 10-percent penalty pursuant to section 72 of $2,600 for 1990.

for an abuse of discretion. See Sego v. Commissioner, supra. Section 402(a) provides generally that distributions from a qualified plan are taxable to the distributee, in the taxable year of the distributee in which distribution occurs, pursuant to section 72. Section 72(p)(1)(A) provides the general rule that proceeds of a loan from a qualified employer plan to a plan participant are treated as a taxable distribution to the participant in the year in which the loan proceeds are received. See P

Respondent also concedes that the Bensons are not liable for the 10-percent penalty pursuant to section 72 of $2,600 for 1990.

(3) Is petitioner liable for the year at issue for the 10- percent additional tax under section 72 with respect to his retirement plan distributions that he received during that year?

s “tier 2 benefits”) generally are includable in gross income to the same extent as are amounts received from a section 401(a) qualified plan. Sec. 72(r). As such, these benefits generally are treated as annuity payments subject to the provisions of section 72. Sec. 402(a). As a general rule, tier 2 benefits are includable in gross income under section 72(a). However, a portion of these benefits may be excluded from income under section 72(b) or (d). These provisions exclude from a taxpayer’s gr

rced to use accumulated savings to pay their living expenses, including the subject IRA. In general, any amount paid or distributed out of an individual retirement account is includable in gross income of the payee or distributee in accordance with section 72. Sec. 408(d)(1); sec. 1.408-4(a)(1), Income Tax Regs; Arnold v. Commissioner, 111 T.C. 250, 253 (1998). Section 408(d)(3) - 10 - provides an exception to the general rule where the entire amount received is rolled over into an IRA or indivi

Under section 72, amounts received as an annuity generally are includable in the recipient’s gross income except to the extent that they represent a reduction or return of premiums or other consideration paid. Sec. 1.72-1(a), Income Tax Regs. Mr. Whittaker did not make any contributions to the plan. All contributions were made by Boeing. Therefore, the f

iscuss the merits of petitioners’ claim that respondent erred by disallowing the deduction for the plan’s “investment losses” taken on that return. 2 Distributions from an IRA are includable in the taxpayer’s/distributee’s income in accordance with sec. 72. See sec. 408(d). The IRA distributions were not received as an annuity by petitioner. Consequently, the distributions are includable in petitioners’ income, except to the extent that any distribution, or any portion of any distribution, is al

- 16 - In general, section 72 deals with the tax treatment of distributions from pensions, annuities, and IRA's.

Taxability of the IRA Distribution Section 408(d)(1) provides that any amount distributed from an IRA “shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72.” Petitioner contends that by endorsing his IRA distribution check to his spouse, whom he was divorcing, he complied with an exception to section 408(d)(1) contained in section 408(d)(6), which provides: (6) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE.-- The transfer of an indi

dditional 10-percent additional tax due for premature distribution. In a notice of deficiency dated December 31, 1995, respondent determined a deficiency of $1,050. This amount represented a 10-percent additional tax on IRA distributions pursuant to section 72. OPINION Under section 408(d)(1), a distribution from an IRA is taxable to the distributee in the year of distribution in the 1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the year in issue

pay a 10-percent additional tax on that distribution. In a notice of deficiency dated January 31, 1997, respondent determined a deficiency in the amount of $1,451. This amount represented a 10-percent additional tax on IRA distributions pursuant to section 72. OPINION Under section 408(d)(1), a distribution from an IRA is taxable to the distributee in the year of distribution in the manner provided under section 72. Section 408(d)(3) provides an exception to the general rule for certain "rollov

Section 72(p)(1)(A) provides that a loan from a qualified employer plan to a plan participant “shall be treated as having been received by such individual as a distribution under such plan.” The loan is “treated” as a distribution only for purposes of section 72, which determines the amount of a distribution subject to income tax.

s that the Gillette ESOP was a qualified stock bonus plan, and we so conclude. Section 402(a) generally provides that any amount actually distributed from a section 401(a) qualified stock bonus plan shall be taxable to the distributee as provided in section 72. - 5 - Under section 72(e), the amount included in gross income equals the amount distributed to the distributee less the amount of any investment (i.e., contributions) made by the distributee. Since petitioner made no contributions to her

Distributions From the Plan and Bona Fide Debt Section 402(a) provides that "any amount actually distributed to any distributee by any employees' trust described in section 401(a) * * * shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72".6 Section 72(p)(1)(A) generally provides that loans from a qualified employer plan to plan participants or beneficiaries are treated as taxable distributions.

Section 402(a) provides that "any amount actually distributed to any distributee by any employees' trust described in section 401(a) * * * shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities)." However, an exception to this general rule is found in section 402(c)(1), which provides: (1) Exclusion from income.--If.-- (A) any portion of the balance to the credit of an employee in a qualified trust is paid to the

ers' IRA During 1987 Petitioners concede they received an IRA distribution in the amount of $1,830 from Putnam Option Income Trust during 1987. Amounts paid or distributed out of an IRA must be included in gross income "in the manner provided under section 72." Sec. 408(d)(1). A 10-percent tax on "early distributions" generally applies where a taxpayer receives a distribution from a qualified retirement plan which is includable in his gross income. Sec. 72(t)(1). Although section 72(t)(2) sets f

Distributions From the Plan and Bona Fide Debt Section 402(a) provides that "any amount actually distributed to any distributee by any employees' trust described in section 401(a) * * * shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72".6 Section 72(p)(1)(A) generally provides that loans from a qualified employer plan to plan participants or beneficiaries are treated as taxable distributions.

IRA Distributions Taxable as Annuities An amount paid out of an IRA must generally be included in gross income by the distributee in the manner provided under section 72, annuities, as modified by section 408(d)(1) and (2).

additional tax pursuant to section 72(t) for early distributions from qualified retirements plans. OPINION Generally, distributions from qualified retirement plans are includable in the distributee’s income in the year of distribution as provided in section 72. Secs. 402(a)(1), 408(d)(1). An exception exists if the distribution proceeds are rolled over into an eligible retirement plan or an IRA within 60 days of the distribution. Secs7'402(a)(5), 408(d)(3). In the consolidated cases before us, r

ir amended Form 1040 for 1989. This contribution was distributed to petitioner by his IRA on April 11, 1991. As a general rule, any amount "paid or distributed out of" an IRA is includable in gross income by the taxpayer in the manner provided under section 72. Sec. 408(d)(1). Section 72(e) is applicable, inter alia, to amounts received under an annuity contract but not received as an annuity. The distribution received by petitioner on April 11, 1991, falls into this category. Amounts received b

72(e)(5)(E) provides: (continued...) - 6 - purposes of section 72, "employee contributions * * * under a defined contribution plan may be treated as a separate contract." To be treated as a separate contract under section 72(d), contributions must be made under a defined contribution plan.

uired by section 408(a) and (d)(3)(A)(i), and section 1.408-2(b), Income Tax Regs., and therefore such amount is includable in his gross income. Amounts paid or distributed out of an IRA must be included in gross income "in the manner provided under section 72". Sec. 408(d)(1). A 10-percent tax on "early distributions" generally applies where a taxpayer receives a distribution from a qualified retirement plan which is includable in his gross income. Sec. 72(t)(1). For purposes of the 10-percent

ir amended Form 1040 for 1989. This contribution was distributed to petitioner by his IRA on April 11, 1991. As a general rule, any amount “paid or distributed out of” an IRA is includable in gross income by the taxpayer in the manner provided under section 72. Sec. 408(d)(1). Section 72(e) is applicable, inter alia, to amounts received under an annuity contract but not received as an annuity. The distribution received by petitioner on April 11, 1991, falls into this category. Amounts received b

Distributions from the CSRS are subject to taxation under section 72 pursuant to section 402(a).

Petitioners argue that such inclusion would result in double taxation of petitioner’s investment in the CSRS and that the lump-sum payment should be treated as a separate account for purposes of section 72 because the CSRS plan in which petitioner participated qualifies, in part, as a defined contribution plan.

The legislative history of section 72 provides that the section was enacted to prevent the diversion of retirement savings for nonretirement purposes and to recapture a measure of the tax benefits provided by the deferral of income tax through retirement plans.

More specifically, section 72(a) provides that, except as otherwise provided in chapter 1 (Normal Taxes and Surtaxes), gross income includes any amount received as an annuity (whether for a period certain or during one or more - 8 - lives) under an annuity, endowment or life insurance contract.8 No provision of section 72 supports the position taken by petitioners in this case.

) provides the general rule that - 4 - unless otherwise provided, any amount paid or distributed from an employee's trust described in section 401(a) is includable in the recipient's gross income for the year of receipt in the manner provided under section 72. These statutes apply to petitioner's distribution. Section 72(t) provides: (1) Imposition of additional tax.--If any taxpayer receives any amount from a qualified retirement plan * * *, the taxpayer's tax * * * for the taxable year in whic

Department of Agriculture (DOA) National Finance Center in 1990 of $580; (5) whether petitioners are liable for a penalty pursuant to section 72 for premature distributions in the aggregate amount of $17,875.81 in 1990; (6) whether petitioners are entitled to rental expense deductions for 1989 and 1990 in 2 Petitioners concede that: (1) They overstated their rental income for 1989 and 1990 by $400 and $898, respectively; (2) they are not entitled to rental depreciation of $14,673

Section 402(a) provides that, subject to certain exceptions not relevant here, any amount distributed from such a trust shall be taxable to the distributee, in the year of distribution, under section 72 (relating to annuities).

Section 72 appears in Subtitle A, Chapter 1 of the Code, captioned “Normal 6 [*6] Taxes and Surtaxes.” For these reasons, we held in Grajales that the 10% exaction is a “tax.” See Grajales, 156 T.C. at 61–62.3 Even closer to home is the decision by the U.S. Court of Appeals for the Third Circuit in Latterman v. United States, 872 F.2d 564 (3d Cir.

Under section 72, earnings that accrue to cash value and annuity policies—often referred to as the “inside buildup”—are not currently taxable to the policyholder (and in general are not taxable to the insurance company). The cash value of the policy thus grows more rapidly than the value of a taxable investment portfolio. The policyholder may access this

In addition Congress has provided by statute that amounts distributed from IRAs are generally includible in the gross income of the “payee” or “distributee” and taxed as provided under section 72, see § 408(d)(1), and that amounts “received” under a life insurance contract, but not paid as an annuity, are includible in the recipient’s gross income to the extent that they exceed the amount invested in the contract, see § 72(e)(1)(A), (5)(A), (C).

ection 61(a)(3) and (4) includes in an individual’s gross income interest payments and gains derived from dealings in property. Subject to certain exceptions, amounts distributed from an IRA are includible in a taxpayer’s gross income as provided in section 72. § 408(d)(1). Petitioner has directed us to no evidence showing respondent’s determinations of unreported income to be arbitrary or erroneous.10 We therefore sustain respondent’s determinations in full. II. Self-employment tax Respondent d

is subject to supervision and examination by the Commissioner of Banking or other officer of such State in charge of the administration of the banking laws of such State.” - 12 - be included in gross income and is taxable in the manner provided in section 72). The parties do not dispute that the value of the AE coins equaled their cost. Respondent argues that Mrs. McNulty should be treated as having possession of the AE coins irrespective of Green Hill’s existence, her status as its manager, an

ithdrawal as income. Because petitioner raises only a legal issue, we decide whether he is liable for the deficiency without regard to the burden of proof. II. Analysis Gross income generally includes distributions from an IRA under the provisions ofsection 72. Sec. 408(d); see Sears v. Commissioner, T.C. Memo. 2010-146. Section 72(t)(1) imposes a 10% additional tax on early distributions from a qualified retirement plan, including an IRA, subject to certain exceptions in section 72(t)(2). See s

sation for services. Gross income also includes distributions from a qualified retirement plan for the year ofdistribution under the 3 We address the burden with respect to the accuracy-related penalties in section IV below. - 6 - [*6] provisions ofsection 72. Secs. 61(a)(10), 408(d); see Sears v. Commissioner, T.C. Memo. 2010-146. As noted above, petitioner does not dispute that he received wages in exchange for services he provided to Wencor in 2013 and 2014, and he does not dispute that he re

Section 72 sets forth the specific rules applicable to taxation of, among other things, annuities and distributions from qualified employer retirement plans. See sec. 403(a). Those rules generally include in the annuitant's gross income any amount received as an annuity, sec. 72(a), but allow tax-free recovery ofthe annuitant's investment in the co

sation for services. Gross income also includes distributions from a qualified retirement plan for the year ofdistribution under the 3 We address the burden with respect to the accuracy-related penalties in section IV below. - 6 - [*6] provisions ofsection 72. Secs. 61(a)(10), 408(d); see Sears v. Commissioner, T.C. Memo. 2010-146. As noted above, petitioner does not dispute that he received wages in exchange for services he provided to Wencor in 2013 and 2014, and he does not dispute that he re

. IRA Distribution Petitioner argues that the $28,250 distribution he received from his IRA is not taxable income. We disagree. Subject to certain exceptions, amounts distributed from an IRA are includible in a taxpayer's gross income as provided in section 72. Sec. 408(d)(1). Petitioner, who has not established that an exception applies, argues that his retirement account was not an IRA. However, petitioner has offered no evidence 4 Petitioner acknowledges that "wages" are taxable but argues th

. IRA Distribution Petitioner argues that the $28,250 distribution he received from his IRA is not taxable income. We disagree. Subject to certain exceptions, amounts distributed from an IRA are includible in a taxpayer's gross income as provided in section 72. Sec. 408(d)(1). Petitioner, who has not established that an exception applies, argues that his retirement account was not an IRA. However, petitioner has offered no evidence 4 Petitioner acknowledges that "wages" are taxable but argues th

the first day) ofthe assets in the IRA as ofthat first day. See sec. 408(e)(2)(B);8 Bunney v. Commissioner, 114 T.C. 259, 262 (2000). The deemed distribution is generally included in the IRA owner's gross income in accordance with the principles ofsection 72, see sec. 408(d)(1); see also sec. 408(d)(3) (providing that a rollover contribution is excepted from the general rule ofsection 408(d)(1)), and the IRA owner also is subject to an additional 10% tax ifthe IRA owner was not yet 59-1/2 years

Under section 72, earnings accruing to cash value and annuity policies--often referred to as the "inside buildup"--are not currently taxable to the policyholder (and generally are not taxable to the insurance company). The cash value ofthe policy thus grows more rapidly than that ofa taxable investment portfolio. The policyholdermay access this value, of

Under section 72, any amount actually distributed from a qualified trust is taxable to the distri- butee in the year distributed. See sec. 402(a). Section 72 has no exception that would prevent the distributions from petitioner's Thrift Savings Plan account from being includible in his gross income. Petitioner contends that it would be inequitable to tax

me from pensions and annuities. Secs. 61(a)(9), (11), 72(a). Section 402(a) provides that the amounts distributed under a plan described in section 401(a), such as a qualified defined benefit plan, generally shall be taxable to the distributee under section 72. Taxpayers seeking an exclusion from gross income must demonstrate they are eligible for the exclusion and bring themselves "within the clear scope ofthe exclusion." Dobra v. Commissioner, 111 T.C. 339, 349 n.16 (1998). The parties agree t

Ringbloom was obliged to include in her gross income (in the manner provided under section 72) those amounts, ifany, subsequentlypaid or distributed to her from the IRA.

7491(a)(1) and (2); see also Rule 142(a)(2).

o any factual issue. Accordingly, Mr. Dabney bears the burden ofproof. See Rule 142(a). - 7 - [*7] II. IRA Distribution Includible in Gross Income Generally, amounts distributed from an IRA are includible in a taxpayer's gross income as provided in section 72. Sec. 408(d)(1). Mr. Dabney argues that the $114,000 withdrawal from his Charles Schwab IRA was not a taxable distribution because the withdrawal was either: (1) a purchase made by the IRA or (2) a transfer between IRA trustees. Respondent

Commissioner, 97 T.C. 51, 58 (1991); Seidel v. Commissioner, T.C. Memo. 2005-67. Thus, a distribution from a qualified retirementplan is taxable to the distributee as ordinary income ifit is not rolled over into an eligible retirement - 6 - [*6] plan. Sec. 402(a), (c); Darby v. Commissioner, 97 T.C. at 58. Neither the Code nor th

he Code to include all income from whatever source derived. Sec. 61(a). In accordance with section 408(d)(1), an amount received as a distribution from an IRA must be included in gross income and is taxable to the recipient in the manner provided in section 72. See sec. 1.408-4(a), Income Tax Regs. The Commissioner's determination ofa taxpayer's liability in a notice of deficiency normally is presumed correct, and the taxpayer bears the burden of proving that the determination is incorrect.4 Rul

bution is includable in petitioners' 2010 income.4 Discussion Section 402(a) provides generally that distributions from a qualified plan are taxable to the distributee in the taxable year in which the distribution occurs pursuant to the provisions ofsection 72. The parties agree that the retirement plan distribution was made from a qualified plan within the meaning ofsection 402. Generally, a loan from a qualified plan is treated as a distribution from the plan in the yearthe loan was made. See

Generally, amounts distributed from an IRA are includable in a taxpayer's gross income as provided in section 72.7 In the return he provided to respondent in February 2012 Mr.

itioner was not entitled to a deduction for her $5,000 contribution to her IRA for tax year 2008. II. Basis in Petitioner's IRA Generally, any amount paid or distributed to a taxpayer from an IRA is included in gross income in the manner provided by section 72. See sec. 408(d)(1). A taxpayer will generally not have a basis in the IRA, unless the taxpayer contributed nondeductible amounts to the IRA. See secs. 72(e), 219(a) and (b), 408(d)(1) and (2); Campbell v. Commissioner, 108 T.C. 54 (1997);

Section 408(d)(1) provides: "Except as otherwise provided in this subsection, any amount paid or distributed out ofan individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72." See Arnold v.

fthe distribution is not includable in gross income because he merely made an error in rolling over the remaining balance ofhis Ameriprise account. Generally, amounts distributed from an IRA are includable in a taxpayer's gross income as provided in section 72. Sec. 408(d)(1). However, section 408(d)(3) provides that a distribution is not includable in gross income ifthe entire amount ofthe distribution an individual receives is paid into an IRA or other eligible retirement plan within 60 days o

Section 408(d)(1) provides a series ofrules relating to IRAs, specifically that: "Except as otherwise provided in this subsection, any amount paid or distributed out ofan individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72." This provision is explained further in section 1.408- 4(a), Income Tax Regs.

The deficiency for 2006 was determined as a section 72 additional tax on premature distributions from retirementplans.

- 51 - Under section 72 any amount which is received under a life insurance contract and which is not received as an annuity shall be included in gross income to the extent it exceeds the investment in the contract.

However, section 408(d (3).provides that a distribution is not includable in gross income ifthe entire am nt ofthe distribution received by an individual is paid into an IRA or other eli ible retirement plan within 60 days ofthe distribution.

Respondent also.determined in the notices that petitioners are subject to the additional tax under section 72 (t) for early withdrawals- from certain qualified plans for their taxable years 2005, 2006, and 2007, respectively.

However, a loan is not a taxable distribution if the loan meets 3 requirements: (1) The principal amount of the loan does not exceed the statutorily specified amount; (2) the loan is repayable within 5 years; and (3) the loan requires substantially level amortization over the loan term. Sec. 72(p) (2). If the TSP does not notif

Many of the previously contested issues, such as petitioner's liabirlity for section 72(t") additional tax on withdrawals from his pension account, have been resolved by concessions.

Distributions and Rollovers Under Section 529 Generally, distributions from a section 529 QTP are includable in the^ distributee's gross income in the year of distribution and are taxed under the provisions of section 72 dealing with annuity payments.

That section reads: The amount actually distributed or made available to any distributee by any trust described in paragraph (1) shall be taxable to the distributee, in the taxable year in which so distributed or made available, under section 72 (relating to annuities) * * "* [Emphasis added.] But what amount was "actually distributed" when BISYS trans- ferred the life-insurance policies to Schwab and Kleinman?

With respect to a ugualifi d annuity contract idescribed in section 403 (b) (1) : "The amount actually distributed to any distributee under such contract shall be taxable to the distributee (in the year in which so distributed) under section 72 (relating to annuities)." See sec.

That section reads: The amount actually distributed or made available to any distributee by any trust described in paragraph (1) shall be taxable to the distributee, in the taxable year in which so distributed or made available, under section 72 (relating to annuities) * * * [Emphasis added.] But what amount was “actually distributed” when BISYS transferred the life-insurance policies to Schwab and Kleinman?

(c) defines qualified retirement plans as including individual retirement accounts (IRA). Section 408 governs the treatment of IRAs. Specifically, section 408(d) provides that distributions from an IRA are generally taxable in the manner directed in section 72. Section 72(t) provides for an additional tax on premature distributions. Petitioner concedes that when she withdrew $3,328 from her IRA at the Washington Mutual Bank in 2004 she was 55 years old. - 16 - She testified that the reason she w

Section 72(t)(1) generally imposes, subject to various exceptions under section 72 ( t)(2), a 10-percent additional tax on early distributions from a qualified retirement plan .

Potential relief here is that: (1) Unless the taxpayer elects otherwise, any amount required to be included in gross income for such taxable year shall be included ratably over the 3-taxable-year period beginning with such taxable year and (2) the sec. 72(t-) additional tax shall not apply. Sec. 1400Q(a) (1), (5) (A). A qualified hurr-icane.distribution is "any distribution from an eligible retirement plan made on or after August 25, 2005, and before January 1, 2007, to an individual whose prin

e tax liability . That liability was the result of the seizure of $289,017 from Mr . Swanton's IRA to satisfy trust fund recovery penalties for periods not-in issue in the instant case . IRA distributions are taxed according to the annuity rules of section 72 .6' Sec . 408(d) . Pursuant to section 7.2, a taxpayer includes'IRA distributions'in gross income but may exclude from gross income that portion of his IRA distribution which reflects nondeductible contributions to his IRA . Petitioners bea

ions Under Section 402(a) Section 402(a) provides : Except as otherwise provided in this section, any amount actually distributed to any distributee by an employees' trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities) .

.) - 5 - percent additional tax under section 72 t) for an early distribution from a qualified retiremen plan in 2004 .

are section 72.01 '(defining .the :crime, of "attempt [ing] * * * to evade or defeat any tax"), section 6501(c)(1) (extending indefinitely the period of limitation for assessment of tax "[i]n the case of a false or fraudulent return with the intent to evad e tax"), and section 6663(a) (imposing a civil penalty fo r underpayments ."due to fraud") . Mr .

i -22- It is consequently determined that the partners of AD FX Trading 2000 Fund, LLC have not established adjusted bases in their respective partnership interests in an amount greater than zero (-0-) : 8 . It is further determined that, in the case of a sale, ,:exchange, or liquidation of AD FX Trading :2000 Fund, LLC partners' partners

At issue here is the exception provided in section 72 (t) (2) (A) (iii) , pertaining,to distributions attributable to an employee's being disabled within .the meaning of section 72(m)(7) .

g preceded by a few years Congress's 1996 and 1997 amendments to the S-corporation.- rules to provide that an employee stock ownership plan (ESOP) under section 401 could be a shareholder of an S corporation although the tax treatment of an ESOP beneficiary is equivalent to that of a traditional IRA owner ; and the income of an ESOP is taxed under-section 72 when distributed to the beneficiary just like an IRA's is .

,"The .issue for decision is whether petitioners are liable for a 10-percent additional tax under section 72 (t) .41 Unless otherwise indicated,all section references are to (continued.

Petitioner does not argue that any recognized exception to the general rule under section 72 ( t)(1) is applicable herein .

for a private annuity , "[t]he gain should be reported ratably over the period of years measured by the annuitant's life expectancy and only from that portion of the annual proceeds which is includible in gross income by virtue of the application of section 72 ." Thus, a taxpayer who exchanges appreciated property for a private annuity is entitled to defer recognition of capital gain relating to the appreciated property until the taxpayer receives annuity payments .

Per Internal Revenue Code Section 72, if a loan is still outstanding when the life insurance policy is surrendered or allowed to lapse, the borrowed amount becomes taxable at the time to the extent the loan value exceeds the owner's basis in the contract, as if the borrowed amount was actually received at the time of surrender or lapse and used to pay off the loan .

Certain Government Payments ; and (3) the 10-percent additional tax of $1,625 under section 72( ;t) for a premature distribution from their qualified retirement plan with Cooper Cameron Corp ., reported to respondent on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing.

Green argues that we should exclude his disability- retirement pay from his income under sections 104 and 105 .17 17 Although Green mentions section 72 in the table of contents of his brief, he fails to argue for relief under that section .

As it turns out, petitioner' s investment in the contract, within the meaning of the relevant statutes, was zero as of the close of 2003 .

72 ( t)(2)(F) ; sec . 1 .408A-6, Q&A-1(b), Income Tax Regs . The Forms 1099-R do not list petitioners' contributions to their Roth IRAs and indicate that no known exception excluded the distributions from gross income . The 30-day letter, which was issued in August 2005, asked petitioners to establish that the distributions were nontaxable and

One of the exceptions listed is a distribution attributable to the employee's being disabled within the meaning of section 72 (m) (7) .

In general, section 72 deals with the income tax treatment of annuities.

The Court finds that petitioner was and is not disabled within the meaning of section 72(m)(7) and is therefore not eligible for the disability exception under section 72 (t) (2) (A) (iii) .

16It is significant that petitioner failed to call as wit- nesses at trial (1) the plan administrator to testify about the respective gross distributions that Sun Life made during 2001 with respect to decedent’s annuity contracts, (2) a representa- tive of A.G. Edwards to testify about the respective gross distributions that A.G. Edwards m

Section 408(d)(1) provides generally that "any amount paid or distributed out of an individual retirement plan shall be included in.gross income by the payee or distributee, as the case may be, in the manner provided under section 72." The term "individual retirement plan" includes an IRA.

(self-employment taxes), in addition to the section 1 taxes on income. Premature distributions from certain types of annuities (sec. 61(a)(9)) and retirement arrangements (sec. 61(a)(11)) are subject to additional taxes under several subsections of section 72. In each of these instances, the base of the specially taxed category of income is not reduced by losses from other categories of income. B. Capital Gains and Losses Section 1 imposes income taxes on individuals. Over the years, section 1(

self-employment taxes), in addition to the section 1 taxes on income. Premature distributions from certain types of annuities (sec. 61(a) (9)) and retirement arrangements (sec. 61(a) (11)) are subject to additional taxes under several subsections of section 72. In each of these instances, the base of the special y taxed category of income is not reduced by losses from other ca egories of Income. B. Capital Gains and Losses Section 1 imp ses incóme taxes on individua s. Over the years, section 1(

come of $1,076 from the public school district. Therefore, we find petitioner must ·include $1,076 in her gross income, as·deterÉined by respondent. Generally, distributions from an IRA are includable in the distributee's gross income as provided in section 72. Sec. 408(d)(1); Lemishow v. Commissioner, 110 T.C. 110, 112 (1998). However, "rollover contributions" are not includable in gross income. Sec. 408(d)(3); Lemishow v. Commissioner, supra at 112. To qualify as a rollover contribution, the.I

Petitioner did not deny that he received the distribution, and he presented no argument relating thereto. As noted earlier, the Court considers that income adjustment as conceded. With respect to the second issue, section 6651(a)(1) provides for an addition to tax in the event a taxpayer fails to file a timely return (determined with regar

Taxability of Beneficiary of Exempt Trust.-- Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities).

Petitioner did not deny that he received the distribution, and he presented no argument relating thereto. As noted earlier, the Court considers that income adjustment as conceded. With respect to the second issue, section 6651(a)(1) provides for an addition to tax in the event a taxpayer fails to file a timely return (determined with regar

IRAs are exempt from income taxation as long as they do not cease to exist as an IRA. Sec. 408(e) (1). Distributions from IRAs are included in the recipient gross income of the distributee. Sec. 408(d)(1). Hence, earnings from assets held in an IRA are not subject to taxation in. the IRA when earned, but rather, are subject to taxatio

Section 402(a) provides in part: Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities).

the employee receives payments under the annuity contract. Sec. 403(b)(1). The amount actually distributed under such contract is taxable to the distributee in the year in which he or she receives the payments under the exclusion percentage rule of section 72. Id. Generally, a tax-sheltered annuity offered by a tax-exempt organization will lose the section 403(b)(1) tax deferral advantage unless, under such contract, distributions attributable to contributions made pursuant to a salary reductio

Section 61(b) specifically includes items included under section 72 (relating to annuities and IRAs).

Taxability of Beneficiary of Exempt Trust.— Except as otherwise provided in this section, any amount actually distributed to any distribu-tee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities).

Petitioner's Retirement Plan Withdrawals Section 72 typically operates to include distributions in gross income, and subsection (t) provides for an additional tax on premature distributions.

the loan from the qualified retirement plan resulted in a taxable distribution from the plan. Distributions from qualified plans generally are included in the distributee’s income in the year of the distribution in accordance with the provisions of section 72. Sec. 402(a). As a general rule, a qualified plan participant who receives a loan from a plan is treated as having received a distribution from the plan in the year the loan is received. Sec. 72(p)(1)(A). However, paragraph (2) of section

The regulations provide in relevant part as follows: Except as otherwise provided in this section, any amount actually paid or distributed or deemed paid or distributed from an individual retirement account or individual retirement annuity shall be included in the gross income of the payee or distributee for the taxable year in which the payment or distribution is received.

OPINION Generally, under section 72, a 10-percent additional tax is imposed against a taxpayer on that portion of a distribution from a qualified retirement plan that is includable in the taxpayer’s gross income.

In general, section 72 deals with the tax treatment of distributions from pensions, annuities, and IRAs.

fically lists "pensions" as a source of gross income. Sec. 61(a)(11); sec. 1.61-11, Income Tax Regs. Generally, any amount distributed to a distributee by an employees trust is taxable to the distributee in the taxable year of the distribution under section 72. Sec. 402(a) and (b). - 6 - Amounts received by an employee under accident or health insurance funded by the employer are generally also includable in a taxpayer's income. Sec. 105(a). Section 105(c), however, permits the exclusion from gr

Taxability of Beneficiary of Exempt Trust.--Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities).

of age 59½, or * * * hardship of the employee”. Sec. 401(k)(2)(B)(i). If a distribution to the employee is made, the amount actually distributed “shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72”. Sec. 402(a). Respondent levied on petitioner’s section 401(k) account, and the compliance with the levy constituted a distribution, albeit involuntary, from that account to the benefit of petitioner. See Larotonda v. Commissioner, 89 T.C

Section 402(a) generally provides that any amount actually distributed to any distributee by any employees’ trust, such as Martin’s plan, shall be taxable to the distributee in the taxable year of the distributee in which distributed, under section 72.

Discussion Section 408(d)(1) provides that “any amount paid or distributed out of an individual retirement plan shall be included in gross income by the * * * distributee * * * in the manner provided under section 72.” Respondent argues that petitioner’s completion of the distribution request form and the resulting issuance of the $40,000 check constituted a distribution to petitioner under section 408(d)(1).

ction 6511(a), however, provides the period of limitations for filing a claim for credit or refund of an overpayment of any tax. Generally, distributions from IRAs are includable in the distributee’s income in the year of distribution as provided in section 72. Sec. 408(d)(1); Schoof v. Commissioner, 110 T.C. 1, 7 (1998). Section 408(d)(3) provides an exception to this rule for “rollover contributions”. To qualify as a rollover contribution, an IRA distribution must be rolled over within 60 - 4

Discussion Section 408(d)(1) provides that “any amount paid or distributed out of an individual retirement plan shall be included in gross income by the * * * distributee * * * in the manner provided under section 72.” Respondent argues that petitioner’s completion of the distribution request form and the resulting issuance of the $40,000 check constituted a distribution to petitioner under section 408(d)(1).

Under section 402(a)(1), the general rule is that a distribution from an exempt employees' trust (under a tax-qualified employees' plan) is taxed to the "distributee" under section 72, which generally provides for current taxation of distributions as ordinary income.

Nevertheless, section 402(e)(1)(A) provides: (A) Alternate Payee Treated as Distributee.--For purposes of subsection (a) and section 72, an alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined in section 414(p)).

)(1). Petitioners argue that the varying interests rule under section 706(d)(1) was triggered when Mr. Katz filed his chapter 7 petition in bankruptcy. Section 706(d)(1), enacted as part of the Deficit Reduction Act of 1984 (DEFRA), Pub. L. 98-369, sec. 72, 98 Stat. 494, 589, provides in pertinent part as follows: (1) In general.–- * * * if during any taxable year of the partnership there is a change in any partner’s interest in the partnership, each partner’s distributive share of any item of i

)(1). Petitioners argue that the varying interests rule under section 706(d)(1) was triggered when Mr. Katz filed his chapter 7 petition in bankruptcy. Section 706(d)(1), enacted as part of the Deficit Reduction Act of 1984 (DEFRA), Pub. L. 98-369, sec. 72, 98 Stat. 494, 589, provides in pertinent part as follows: (1) In general.–- * * * if during any taxable year of the partnership there is a change in any partner’s interest in the partnership, each partner’s distributive share of any item of i

rd and admitted into evidence a letter from petitioner and a copy of Mr. Spuler’s will. - 6 - IRA Distribution From Mr. Spuler Generally, any amount paid or distributed to a taxpayer from an IRA is included in gross income in the manner provided by section 72. See sec. 408(d)(1). A payee will generally not have a basis in the IRA, unless the payee contributed nondeductible amounts to the IRA. See secs. 72(e), 219(a) and (b), 408(d)(1) and (2); Campbell v. Commissioner, 108 T.C. 54 (1997); sec. 1

)(1). Petitioners argue that the varying interests rule under section 706(d)(1) was triggered when Mr. Katz filed his chapter 7 petition in bankruptcy. Section 706(d)(1), enacted as part of the Deficit Reduction Act of 1984 (DEFRA), Pub. L. 98-369, sec. 72, 98 Stat. 494, 589, provides in pertinent part as follows: (1) In general.–- * * * if during any taxable year of the partnership there is a change in any partner’s interest in the partnership, each partner’s distributive share of any item of i

OPINION We must decide whether petitioner (1) is entitled to any Schedule A itemized deductions for the 1993 and 1994 taxable years; (2) is liable for additional tax under section 72; and (3) is liable for any additions to tax under section 6651(a) or 6654(a).

Section 408(d)(1) provides generally that “any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72.” The term “individual retirement plan” includes an IRA.

er's Green Point and Apple and Keogh accounts were includable in petitioner's 1993 income. Generally, any amount paid or distributed out of an IRA is included in gross income by the payee or distributee, as the case may be, in the manner provided in section 72. Sec. 408(d)(1). Rollover contributions, however, are not includable in gross income. Sec. 408(d)(3)(A). One type of rollover contribution consists of any amount paid or distributed out of an IRA to the individual for whose benefit the IRA

93. Petitioner has not directed our attention to, and we have not found, anything in the record suggesting that any part of the pension distributions is excludable from gross income (as, for example, investment in the contract, within the meaning of sec. 72), except for petitioner’s arguments about the status of Federal Reserve Notes and the “Fair Market Value Exchange of his labor”. We conclude that respondent has shown by clear and convincing evidence that petitioner has more than $39,000 of 1

Other Code sections convey the same meaning by different terms such as providing that "gross income includes" alimony (section 71), annuities (section 72), prizes and awards (section 74), and Social Security benefits (section 86).

s that the Gillette ESOP was a qualified stock bonus plan, and we so conclude. Section 402(a) generally provides that any amount actually distributed from a section 401(a) qualified stock bonus plan shall be taxable to the distributee as provided in section 72. - 5 - Under section 72(e), the amount included in gross income equals the amount distributed to the distributee less the amount of any investment (i.e., contributions) made by the distributee. Since petitioner made no contributions to her

s that the Gillette ESOP was a qualified stock bonus plan, and we so conclude. Section 402(a) generally provides that any amount actually distributed from a section 401(a) qualified stock bonus plan shall be taxable to the distributee as provided in section 72. - 5 - Under section 72(e), the amount included in gross income equals the amount distributed to the distributee less the amount of any investment (i.e., contributions) made by the distributee. Since petitioner made no contributions to her

ept as provided in paragraph (4), the amount actually distributed to any distributee by any employees' trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to him, in the year in which so distributed under section 72 (relating to annuities) * * * The parties appear to be in agreement that the Plan and Trust meets the requirements of section 401(a) and that there is a trust forming a part of the Plan that is exempt from tax under 2 Sec.

tirement account. Respondent asserts that petitioner failed to roll over the $408,623 into a qualified IRA. Distributions from qualified retirement plans are generally includable in the distributee's income in the year of distribution as provided in section 72. Secs. 402(a)(1), 408(d)(1). An exception exists if the distribution proceeds are rolled over into an eligible retirement plan or an IRA within 60 days of the 4 Petitioner is not a stranger to this Court or the U.S. District Court for the

tirement account. Respondent asserts that petitioner failed to roll over the $408,623 into a qualified IRA. Distributions from qualified retirement plans are generally includable in the distributee's income in the year of distribution as provided in section 72. Secs. 402(a)(1), 408(d)(1). An exception exists if the distribution proceeds are rolled over into an eligible retirement plan or an IRA within 60 days of the 4 Petitioner is not a stranger to this Court or the U.S. District Court for the

ner’s Green Point and Apple and Keogh accounts was includable in petitioner’s 1993 income. Generally, any amount paid or distributed out of an IRA is included in gross income by the payee or distributee, as the case may be, in the manner provided in section 72. Sec. 408(d)(1). Rollover contributions, however, are not includable in gross income. Sec. 408(d)(3)(A). One type of rollover contribution consists of any amount paid or distributed out of an IRA to the individual for whose benefit the IRA

Other Code sections convey the same meaning by different terms such as providing that “gross income includes” alimony (section 71), annuities (section 72), prizes and awards (section 74), and Social Security benefits (section 86).

That section provides generally that “the amount actually distributed to any distributee * * * shall be taxable to him, in the year in which so distributed, under section 72 (relating to annuities).” There is an exception to that rule of taxability for certain “rollover amounts”.

ragraph (4) [not here relevant], the amount actually distributed to any distributee by any employees' trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to him, in the year in which so distributed, under section 72 * * * More specifically, section 402(a)(9) provides: For purposes of subsection (a)(1) and section 72, any alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or pay

Section 402(a)(1) provides that "the amount actually distributed to any distributee by any employees' trust described in section 401(a) * * * shall be taxable to him, in the year in which so distributed, under section 72 (relating to annuities)." However, an exception to this general rule is found in section 402(a)(5)(A), which provides: 5 Petitioner apparently is confused by the fact that, sec.

within the meaning of section 402(e)(4)(A). OPINION As a general rule, a distribution from a qualified plan, such as the Retirement System, is taxed to the recipient in the year distributed under the rules relating to annuities. Sec. 402(a)(1); see sec. 72. However, section 402(e)(1) provides for a preferential forward averaging method of computing the tax on certain such distributions. The parties agree that petitioners are entitled to this preferential method of computing the tax on the Trans

because the IRA had not been funded and the IRA accounts had been closed. OPINION Section 402(a)(1)3 provides the general rule that amounts distributed by a qualified plan are taxable in the year of distribution in accordance with the provisions of section 72. Section 402(a)(5) provides that taxation of a current distribution may be deferred if it is rolled over into an eligible retirement plan within 60 days of the distribution. Petitioners bear the burden of proving that respondent's determin