DISABILITY OF SPOUSE IS NOT AN EXCEPTION TO THE ADDITIONAL TAX OF 10% TO AN UNDER AGE 59 ½ DISTRIBUTION FROM AN IRA
In Merrell v. Commissioner, TC Summary Opinion 2020-5 (Jan. 16, 2020), an IRA owner under age 59 ½ and not disabled received a distribution from his IRA. The owner did not pay an additional tax of 10% pursuant to Internal Revenue Code S 72(t) (1) because his wife, with whom he filed a joint income tax return, was disabled. The Internal Revenue Service issued a notice of deficiency noting that the distribution should be subject to the 10% additional tax. The Tax Court noted that the exception to the additional 10% tax under Internal Revenue Code S 72 (t) (2) (A) (iii) applies when an employee is disabled, and that the term “employee” under Internal Revenue Code S 72 (t) (5) is defined as “the individual for whose benefit such plan was established.” Since the owner was not disabled, the Tax Court held that the exception to the 10% additional tax under Internal Revenue Code S 72 (t) (2) (A) (iii) did not apply
Ref: Philadelphia Estate Planning Council Current Developments—February 2020
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