Paul L. Caron
Dean



Wednesday, November 25, 2009

Court: Parents Who Cash in IRA to Pay for Kid's College Not Subject to 10% Penalty

The Tax Court yesterday held that parents who withdrew $110,691 from their IRA were not subject to the 10% early distribution penalty on the portion used to pay their daughter's room and board at Michigan State under the higher education exception of § 72(t)(2)(E).  But the 10% penalty applied to the remaining portion that was used to pay down their $80,000 credit card debt to avoid bankruptcy because there is no general financial hardship exception in § 72(t).  Venet v. Commissioner, T.C. Memo. 2009-268 (Nov. 24, 2009).

https://taxprof.typepad.com/taxprof_blog/2009/11/tax-court-parents-.html

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