Early this year, Scott Lowe, age 54, became dissatisfied with the service he was receiving from the broker who managed his traditional IRA. He requested a distribution of the $48,200 balance in the account and received a check for this amount from the broker on May 23. Scott planned to roll the distribution over into a new IRA with a different broker. Before he could do so, he received news that his son-in-law had died in a hunting accident. Scott immediately traveled to his daughter?s home to console her and his grandchildren. During this period of trauma and confusion, Scott wrote a check for $48,200 to his new broker but failed to instruct the broker to put the money into an IRA. Instead, the broker invested it in a taxable money market account. Scott and his broker did not discover the mistake until late December. Must Scott include the $48,200 withdrawal in his gross income and pay a $4,820 premature withdrawal penalty?

Answer should be formatted as the attached file.

1. Facts: Tim Loker has no family relationship to the Bryants family. Tim Loker is five years old, which is under 18. Tim Loker became a member of the Bryants household since August 12 of this year, which means by the end of this year, Tim will have been in the household for less than 5 months. Bryants family provided 100% of Tim's financial support, and intend to raise Tim as their kid. 2. Issues: Can Tim Loker be defined as a dependent of Bryants family? Is the financial support to Tim be able to exempt from Bryants family's tax return? 3. Rules of Law In this case, Tim and the Bryants family has no family relationship. Based on the Section 152(d) (2)(H), Tim does not qualify to be treated as the Bryants family relative not unless he shares the same principal place of abode both as the taxpayer as well as a member of the taxpayer's household\" for the current taxable year (Legal Information Institute 1992). In addition, Reg Section 1. 152-1 (b) indicates that Tim Loker should have been a member of the Bryants family for the entire year apart from a consideration of a temporary absence because of special circumstance. 4. Conclusion and Recommendations The provided regulation concludes that the lack of more than 6 months is not regarded as temporary. In this case, Tim has been with the Bryant family for less than 5 months thus he misses an exact of 7 months to complete a full year with the family. In conclusion, Tim cannot be considered as a relative to the Bryants household and thus Bryants family is not objective to claim Tim as their dependent on their current year's tax returns. Bryants family must wait for the following year to include the financial support in their tax return. 5. Positions you would consider taking/ areas you would like to analyze in more depth if you had more time In this case, Tim Loker can be placed under adopted child with special needs category in under Section 23(d)(3). The term \"child with special needs\" means any child if such State has determined that there exists with respect to the child a specific factor or condition because of which it is reasonable to conclude that such child cannot be placed with adoptive parents without providing adoption assistance, and such child is a citizen or resident of the United States (as defined in section 217(h)(3)). According to Section 23(a)(3), The Bryants family shall be treated as having paid during such year qualified adoption expenses with respect to such adoption in an amount equal to the excess (if any) of $10,000 over the aggregate qualified adoption expenses actually paid or incurred by the taxpayer with respect to such adoption during such taxable year and all prior taxable years