Clinical depression doesn't negate 10% premature withdrawal penalty.Dwyer was a stock trader. During the latter part of 1989, his trading partnership lost a substantial amount of money and he was sued by the other partners. In October 1989, Dwyer withdrew over $2(n1,000 from his individual retirement account to solve his financial problems. He traded more than 350 stocks during the last three months of 1989, grossing over $20 million in stock sales for his own account. Much of the lika withdrawal was lost during this period as a result of stock trading. Sometime during 1989, Dwyer was diagnosed as having a biochemical depression. He saw a psychiatrist frequently and was treated with various drugs but was not hospitalized. Eventually, his depression was alleviated with a combination of drugs and therapy. Dwyer reported the IRA withdrawal on his tax return but did not pay the 10% premature withdrawal penalty. The 10% penalty (IRC section 72(t)) applies to withdrawals from IRAs and other qualified plans taken before age 59 unless an exception applies. One is distributions attributable to the participant's disability (section 72(0(2)). Section 72(m) defines disabled as "unable to engage m any substantial gainful activity by reason of any medically determinable determinable adj. defining something which may be terminated upon the occurrence of a particular event, used primarily to describe an interest in real property, such as a fee simple determinable, in which property is deeded to another, but may revert to the giver or go to a third person if, as examples, the receiver (grantee) marries, divorces, or no longer lives in the house. physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration." The IRS claimed Dwyer had to pay the penalty. Result; For the IRS. Dwyer's illness did not fit the statutory definition: He was able to engage in trading activity. Therefore, he had to pay the penalty. ""Dwyer, 106 TC no. 18. Edited by Anne Wagenbrenner, JD, LLM LLM - Launch Loader Module LLM - Layered Lossy Medium LLM - Left Lane Must Turn Left LLM - Legum Magister LLM - Lin Lunin Maldacena (class of half supersymmetric solutions in string theory) LLM - Loader Launcher Module LLM - Local Level Model LLM - Logical Link Multiplexing LLM - Lower Landing Minimums LLM - Master of Laws, editor, AICPA client newsletters. |
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