In Uncategorized on 01/17/2023 at 16:36

Robert B. Lucas, T. C. Memo. 2023-9, filed 1/17/23, had diabetes, which he treated with insulin in the year at issue. He also lost his job and took a draw from his retirement plan, which netted him a SNOD and the 10% whatever-it-is.

Robert conflates the taxability of the draw itself with the 10% whatever-it-is. The draw is taxable; health has nothing to do with it.

As regards the 10%, Judge Patrick J (“Scholar Pat”) Urda checks out the Section 72(t)(2)(A)(iii) exception, and finds the drawer must be “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration.” T. C. Memo. 2023-9, at p. 4. And even though Reg. 1.72-17A(f)(2) includes diabetes as a condition preventing gainful employment, the question remains: did the condition prevent Robert from working?

Judge Scholar Pat: ” Mr. Lucas was diagnosed with diabetes… but was able to work as a software engineer for two years, including the year that he received the distribution from his 401(k) plan account, effectively treating his diabetes with a mix of insulin shots and other medications.” T. C. Memo. 2023-9, at p. 5.

No break for Robert.


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