4972 Tax on Lump-Sum Distributions (From Qualified Plans of P

Form

4972

Department of the Treasury
(99)
Internal Revenue Service

OMB No. 1545-0193

Tax on Lump-Sum Distributions
©

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Attachment
Sequence No.

Attach to Form 1040, Form 1040NR, or Form 1041.

Name of recipient of distribution

Part I

2008

(From Qualified Plans of Participants Born Before January 2, 1936)

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Identifying number

Complete this part to see if you can use Form 4972

Was this a distribution of a plan participant’s entire balance (excluding deductible voluntary employee
contributions and certain forfeited amounts) from all of an employer’s qualified plans of one kind (pension,
profit-sharing, or stock bonus)? If “No,” do not use this form
Did you roll over any part of the distribution? If “Yes,” do not use this form
Was this distribution paid to you as a beneficiary of a plan participant who was born before
January 2, 1936?

Were you (a) a plan participant who received this distribution, (b) born before January 2, 1936, and (c) a
participant in the plan for at least 5 years before the year of the distribution?
If you answered “No” to both questions 3 and 4, do not use this form.
5a Did you use Form 4972 after 1986 for a previous distribution from your own plan? If “Yes,” do not use this
form for a 2008 distribution from your own plan
b If you are receiving this distribution as a beneficiary of a plan participant who died, did you use Form 4972
for a previous distribution received for that participant after 1986? If “Yes,” do not use the form for this
distribution
Part II
Complete this part to choose the 20% capital gain election (see instructions)
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6 Capital gain part from Form 1099-R, box 3
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©
7 Multiply line 6 by 20% (.20)

Yes No
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2
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5a

5b

If you also choose to use Part III, go to line 8. Otherwise, include the amount from line 7 in the total
on Form 1040, line 44, Form 1040NR, line 41, or Form 1041, Schedule G, line 1b, whichever applies.
Part III
Complete this part to choose the 10-year tax option (see instructions)
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Ordinary income from Form 1099-R, box 2a minus box 3. If you did not complete Part II, enter
the taxable amount from Form 1099-R, box 2a
Death benefit exclusion for a beneficiary of a plan participant who died before August 21, 1996
Total taxable amount. Subtract line 9 from line 8
Current actuarial value of annuity from Form 1099-R, box 8. If none, enter -0Adjusted total taxable amount. Add lines 10 and 11. If this amount is $70,000 or more, skip lines
13 through 16, enter this amount on line 17, and go to line 18
13
Multiply line 12 by 50% (.50), but do not enter more than $10,000
Subtract $20,000 from line 12. If line 12 is
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$20,000 or less, enter -015
Multiply line 14 by 20% (.20)
Minimum distribution allowance. Subtract line 15 from line 13
Subtract line 16 from line 12
Federal estate tax attributable to lump-sum distribution
Subtract line 18 from line 17. If line 11 is zero, skip lines 20 through 22 and go to line 23
Divide line 11 by line 12 and enter the result as a decimal (rounded
.
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to at least three places)
21
Multiply line 16 by the decimal on line 20
22
Subtract line 21 from line 11
Multiply line 19 by 10% (.10)
Tax on amount on line 23. Use the Tax Rate Schedule in the instructions
Multiply line 24 by ten (10). If line 11 is zero, skip lines 26 through 28, enter this amount on line
29, and go to line 30
26
Multiply line 22 by 10% (.10)
Tax on amount on line 26. Use the Tax Rate Schedule in the
27
instructions
Multiply line 27 by ten (10)
©
Subtract line 28 from line 25. Multiple recipients, see instructions
Tax on lump-sum distribution. Add lines 7 and 29. Also include this amount in the total on Form
©
1040, line 44, Form 1040NR, line 41, or Form 1041, Schedule G, line 1b, whichever applies

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 13187U

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Form

4972

(2008)

Form 4972 (2008)

Section references are to the Internal
Revenue Code.

General Instructions
Purpose of Form
Use Form 4972 to figure the tax on a
qualified lump-sum distribution (defined
below) you received in 2008 using the 20%
capital gain election, the 10-year tax
option, or both. These are special formulas
used to figure a separate tax on the
distribution that may result in a smaller tax
than if you reported the taxable amount of
the distribution as ordinary income.
You pay the tax only once, for the year
you receive the distribution, not over the
next 10 years. The separate tax is added
to the regular tax figured on your other
income.

Related Publications
Pub. 575, Pension and Annuity Income.
Pub. 721, Tax Guide to U.S. Civil Service
Retirement Benefits.
Pub. 939, General Rule for Pensions and
Annuities.

What Is a Qualified
Lump-Sum Distribution?
It is the distribution or payment in 1 tax
year of a plan participant’s entire balance
from all of an employer’s qualified plans of
one kind (for example, pension,
profit-sharing, or stock bonus plans) in
which the participant had funds. The
participant’s entire balance does not
include deductible voluntary employee
contributions or certain forfeited amounts.
The participant must have been born
before January 2, 1936.
Distributions upon death of the plan
participant. If you received a qualifying
distribution as a beneficiary after the
participant’s death, the participant must
have been born before January 2, 1936,
for you to use this form for that
distribution.
Distributions to alternate payees. If you
are the spouse or former spouse of a plan
participant who was born before January
2, 1936, and you received a qualified
lump-sum distribution as an alternate
payee under a qualified domestic relations
order, you can use Form 4972 to make the
20% capital gain election and use the
10-year tax option to figure your tax on the
distribution.
See How To Report the Distribution on
this page.

Distributions That Do Not Qualify
for the 20% Capital Gain Election
or the 10-Year Tax Option
The following distributions are not qualified
lump-sum distributions and do not qualify
for the 20% capital gain election or the
10-year tax option.
● The part of a distribution not rolled over
if the distribution is partially rolled over to
another qualified plan or an IRA.

Page

● Any distribution if an earlier election to
use either the 5- or 10-year tax option had
been made after 1986 for the same plan
participant.
● U.S. Retirement Plan Bonds distributed
with the lump sum.
● A distribution made during the first 5 tax
years that the participant was in the plan,
unless it was paid because the participant
died.
● The current actuarial value of any annuity
contract included in the lump sum
(Form 1099-R, box 8, should show this
amount, which you use only to figure tax
on the ordinary income part of the
distribution).
● A distribution to a 5% owner that is
subject to penalties under section
72(m)(5)(A).
● A distribution from an IRA.
● A distribution from a tax-sheltered
annuity (section 403(b) plan).
● A distribution of the redemption
proceeds of bonds rolled over tax free to a
qualified pension plan, etc., from a
qualified bond purchase plan.
● A distribution from a qualified plan if the
participant or his or her surviving spouse
previously received an eligible rollover
distribution from the same plan (or another
plan of the employer that must be
combined with that plan for the lump-sum
distribution rules) and the previous
distribution was rolled over tax free to
another qualified plan or an IRA.
● A distribution from a qualified plan that
received a rollover after 2001 from an IRA
(other than a conduit IRA), a governmental
section 457 plan, or a section 403(b)
tax-sheltered annuity on behalf of the plan
participant.
● A distribution from a qualified plan that
received a rollover after 2001 from another
qualified plan on behalf of that plan
participant’s surviving spouse.
● A corrective distribution of excess
deferrals, excess contributions, excess
aggregate contributions, or excess annual
additions.
● A lump-sum credit or payment from the
Federal Civil Service Retirement System (or
the Federal Employees’ Retirement
System).

How To Report the Distribution
If you can use Form 4972, attach it to
Form 1040 (individuals), Form 1040NR
(nonresident aliens), or Form 1041 (estates
or trusts). The payer should have given you
a Form 1099-R or other statement that
shows the amounts needed to complete
Form 4972. The following choices are
available.
20% capital gain election. If there is an
amount in Form 1099-R, box 3, you can
use Form 4972, Part II, to apply a 20% tax
rate to the capital gain portion. See Capital
Gain Election on page 3.
10-year tax option. You can use Part III to
figure your tax on the lump-sum

2

distribution using the 10-year tax option
whether or not you make the 20% capital
gain election.
Where to report. Report amounts from
your Form 1099-R either directly on your
tax return (Form 1040, 1040NR, or 1041) or
on Form 4972.
1. If you do not use Form 4972, and you
file:
a. Form 1040. Report the entire amount
from box 1 (Gross distribution) of Form
1099-R on line 16a, and the taxable
amount on line 16b. If your pension or
annuity is fully taxable, enter the amount
from box 2a (Taxable amount) of Form
1099-R on line 16b; do not make an entry
on line 16a.
b. Form 1040NR. Report the entire amount
from box 1 (Gross distribution) of Form
1099-R on line 17a, and the taxable
amount on line 17b. If your pension or
annuity is fully taxable, enter the amount
from box 2a (Taxable amount) of Form
1099-R on line 17b; do not make an entry
on line 17a.
c. Form 1041. Report the amount on
line 8.
2. If you do not use Part III of Form 4972,
but use Part II, report only the ordinary
income portion of the distribution on Form
1040, lines 16a and 16b, on Form 1040NR,
lines 17a and 17b, or on Form 1041, line 8.
The ordinary income portion is the amount
from box 2a of Form 1099-R, minus the
amount from box 3 of that form.
3. If you use Part III of Form 4972, do not
include any part of the distribution on Form
1040, lines 16a and 16b, on Form 1040NR,
lines 17a and 17b, or on Form 1041,
line 8.
The entries in other boxes on Form
1099-R may also apply in completing
Form 4972.
● Box 6 (Net unrealized appreciation in
employer’s securities). See Net unrealized
appreciation (NUA) on page 3.
● Box 8 (Other). Current actuarial value of
an annuity.
If applicable, get the amount of federal
estate tax paid attributable to the taxable
part of the lump-sum distribution from the
administrator of the deceased’s estate.

How Often You Can Use
Form 4972
After 1986, you can use Form 4972 only
once for each plan participant. If you
receive more than one lump-sum
distribution for the same participant in 1
tax year, you must treat all those
distributions the same way. Combine them
on a single Form 4972.
If you make an election as a beneficiary
of a deceased participant, it does not
affect any election you can make for
qualified lump-sum distributions from your
own plan. You can also make an election
as the beneficiary of more than one
qualifying person.
Example. Your mother and father died
and each was born before January 2,
1936. Each had a qualified plan of which

Form 4972 (2008)

you are the beneficiary. You also received
a qualified lump-sum distribution from your
own plan and you were born before
January 2, 1936. You can make an election
for each of the distributions; one for
yourself, one as your mother’s beneficiary,
and one as your father’s. It does not
matter if the distributions all occur in the
same year or in different years. File a
separate Form 4972 for each participant’s
distribution.
An earlier election on Form 4972
or Form 5544 for a distribution
TIP before 1987 does not prevent
you from making an election for
a distribution after 1986 for the same
participant, provided the participant was
under age 591⁄ 2 at the time of the pre-1987
distribution.

When To File Form 4972
You can file Form 4972 with either an
original or amended return. Generally, you
have 3 years from the later of the due date
of your tax return or the date you filed your
return to choose to use any part of
Form 4972.

Capital Gain Election
If the distribution includes a capital gain,
you can (a) make the 20% capital gain
election in Part II of Form 4972 or (b) treat
the capital gain as ordinary income.
Only the taxable amount of distributions
resulting from pre-1974 participation
qualifies for capital gain treatment. The
capital gain amount should be shown in
Form 1099-R, box 3. If there is an amount
in Form 1099-R, box 6 (net unrealized
appreciation (NUA)), part of it will also
qualify for capital gain treatment. Use the
NUA Worksheet on this page to figure the
capital gain part of NUA if you make the
election to include NUA in your taxable
income.
You can report the ordinary income
portion of the distribution on Form 1040,
line 16b, Form 1040NR, line 17b, or Form
1041, line 8 or you can figure the tax using
the 10-year tax option. The ordinary
income portion is the amount from Form
1099-R, box 2a, minus the amount from
box 3 of that form.
Net unrealized appreciation (NUA).
Normally, NUA in employer securities
received as part of a lump-sum distribution
is not taxable until the securities are sold.
However, you can elect to include NUA in
taxable income in the year received.
The total amount to report as NUA
should be shown in Form 1099-R, box 6.
Part of the amount in box 6 will qualify for
capital gain treatment if there is an amount
in Form 1099-R, box 3. To figure the total
amount subject to capital gain treatment
including the NUA, complete the NUA
Worksheet on this page.

Specific Instructions
Name of recipient of distribution and
identifying number. At the top of Form
4972, fill in the name and identifying
number of the recipient of the distribution.

Page

If you received more than one qualified
distribution in 2008 for the same plan
participant, add them and figure the tax on
the total amount. If you received qualified
distributions in 2008 for more than one
participant, file a separate Form 4972 for
the distributions of each participant.
If you and your spouse are filing a joint
return and each has received a lump-sum
distribution, complete and file a separate
Form 4972 for each spouse’s election,
combine the tax, and include the combined
tax in the total on Form 1040, line 44.
If you are filing for a trust that shared the
distribution only with other trusts, figure
the tax on the total lump sum first. The
trusts then share the tax in the same
proportion that they shared the distribution.
Multiple recipients of a lump-sum
distribution. If you shared in a lump-sum
distribution from a qualified retirement plan
when not all recipients were trusts (a
percentage will be shown in Form 1099-R,
boxes 8 and/or 9a), figure your tax on
Form 4972 as follows. (Box numbers used
below are from Form 1099-R.)
Step 1. Complete Form 4972, Parts I
and II. If you make the 20% capital gain
election in Part II and also elect to include
NUA in taxable income, complete the NUA
Worksheet below to determine the amount
of NUA that qualifies for capital gain
treatment. Then, skip Step 2 and go to
Step 3.
Step 2. Use this step only if you do not
elect to include NUA in your taxable
income or if you do not have NUA.
● If you are not making the capital gain
election, divide the amount in box 2a by
your percentage of distribution in box 9a.
Enter this amount on Form 4972, line 8.

3

● If you are making the capital gain
election, subtract the amount in box 3 from
the amount in box 2a. Divide the result by
your percentage of distribution in box 9a.
Enter the result on Form 4972, line 8.
● Divide the amount in box 8 by the
percentage in box 8. Enter the result on
Form 4972, line 11. Then, skip Step 3 and
go to Step 4.
Step 3. Use this step only if you elect to
include NUA in your taxable income.
● If you are not making the capital gain
election, add the amount in box 2a to the
amount in box 6. Divide the result by your
percentage of distribution in box 9a. Enter
the result on Form 4972, line 8.
● If you are making the capital gain
election, subtract the amount in box 3 from
the amount in box 2a. Add to the result the
amount from line F of your NUA
Worksheet. Then, divide the total by your
percentage of distribution in box 9a. Enter
the result on Form 4972, line 8.
● Divide the amount in box 8 by the
percentage in box 8. Enter the result on
Form 4972, line 11.
Step 4. Complete Form 4972 through
line 28.
Step 5. Complete the following
worksheet to figure the entry for Form
4972, line 29:
A. Subtract line 28 from line 25
B. Enter your percentage of the
distribution from box 9a
C. Multiply line A by line B. Enter
here and on Form 4972, line
29. Also, write “MRD” on the
dotted line next to line 29

NUA Worksheet (keep for your records)
A. Enter the amount from Form 1099-R, box 3
B. Enter the amount from Form 1099-R, box 2a
C. Divide line A by line B and enter the result as a decimal (rounded to
at least three places)
D. Enter the amount from Form 1099-R, box 6
E. Capital gain portion of NUA. Multiply line C by line D
F. Ordinary income portion of NUA. Subtract line E from line D
G. Total capital gain portion of distribution. Add lines A and E. Enter here
and on Form 4972, line 6. On the dotted line next to line 6, write
"NUA" and the amount from line E above

A.
B.
C.
D.
E.
F.

.

G.

Death Benefit Worksheet (keep for your records)
A.

Enter the amount from Form 1099-R, box 3, or, if you are including
NUA in taxable income, the amount from line G of the NUA Worksheet
B. Enter the amount from Form 1099-R, box 2a, plus, if you are including
NUA in taxable income, the amount from Form 1099-R, box 6
C. Divide line A by line B and enter the result as a decimal (rounded to
at least three places)
D. Enter your share of the death benefit exclusion*
E. Multiply line D by line C
F. Subtract line E from line A. Enter here and on Form 4972, line 6

A.
B.
C.
D.
E.
F.

.

*Applies only for participants who died before August 21, 1996. If there are multiple recipients of the
distribution, the allowable death benefit exclusion must be allocated among the recipients in the same
proportion that they share the distribution.

Form 4972 (2008)

Part II
See Capital Gain Election on page 3 before
completing Part II.
Line 6. Leave this line blank if your
distribution does not include a capital gain
amount or you are not making the 20%
capital gain election, and go to Part III.
Generally, enter on line 6 the amount
from Form 1099-R, box 3. However, if you
elect to include NUA in your taxable
income, use the NUA Worksheet on page 3
to figure the amount to enter on line 6. If
you are taking a death benefit exclusion
(for a participant who died before August
21, 1996), use the Death Benefit Worksheet
on page 3 to figure the amount to enter on
line 6. The remaining allowable death
benefit exclusion should be entered on line
9 if you choose the 10-year tax option.
If any federal estate tax was paid on the
lump-sum distribution, you must decrease
the capital gain amount by the amount of
estate tax applicable to it. To figure this
amount, you must complete the Death
Benefit Worksheet on page 3 through line
C, even if you do not take the death
benefit exclusion. Multiply the total federal
estate tax paid on the lump-sum
distribution by the decimal on line C of the
Death Benefit Worksheet. The result is the
portion of the federal estate tax applicable
to the capital gain amount. Then, use that
result to reduce the amount in Form
1099-R, box 3, if you do not take the
death benefit exclusion, or reduce line F of
the Death Benefit Worksheet if you do.
Enter the remaining capital gain on line 6.
If you elected to include NUA in taxable
income, subtract the portion of federal
estate tax applicable to the capital gain
amount from the amount on line G of the
NUA Worksheet. Enter the result on line 6.
Enter the remainder of the federal estate
tax on line 18.
If you take the death benefit
exclusion and federal estate tax
was paid on the capital gain
CAUTION amount, the capital gain amount
must be reduced by both the procedures
discussed above to figure the correct entry
for line 6.

Part III
Line 8. If Form 1099-R, box 2a, is blank,
you must first figure the taxable amount.
For details on how to do this, see
Pub. 575.
If you made the 20% capital gain
election, enter only the ordinary income
portion of the distribution on this line. The

Page

ordinary income portion is the amount from
Form 1099-R, box 2a, minus the amount
from box 3 of that form. Add the amount
from line F of the NUA Worksheet if you
included NUA capital gain in the 20%
capital gain election.
If you did not make the 20% capital gain
election and did not elect to include NUA
in taxable income, enter the amount from
Form 1099-R, box 2a. If you did not make
the 20% capital gain election but did elect
to include NUA in your taxable income,
add the amount from Form 1099-R,
box 2a, to the amount from Form 1099-R,
box 6. Enter the total on line 8. On the
dotted line next to line 8, write “NUA” and
the amount of NUA included.

CAUTION

Community property laws do
not apply in figuring tax on the
amount you report on line 8.

Line 9. If you received the distribution
because of the plan participant’s death
and the participant died before August 21,
1996, you may be able to exclude up to
$5,000 of the lump sum from your gross
income. If there are multiple recipients of
the distribution not all of whom are trusts,
enter on line 9 the full remaining allowable
death benefit exclusion (after the amount
taken against the capital gain portion of
the distribution by all recipients—see the
instructions for line 6) without allocation
among the recipients. (The exclusion is in
effect allocated among the recipients
through the computation under Multiple
recipients of a lump-sum distribution on
page 3.) This exclusion applies to the
beneficiaries or estates of common-law
employees, self-employed individuals, and
shareholder-employees who owned more
than 2% of the stock of an S corporation.
Enter the allowable death benefit
exclusion on line 9. But see the
instructions for line 6 if you made a capital
gain election.
Line 18. A beneficiary who receives a
lump-sum distribution because of a plan
participant’s death must reduce the taxable
part of the distribution by any federal
estate tax paid on the lump-sum
distribution. Do this by entering on line 18
the federal estate tax attributable to the
lump-sum distribution. Also see the
instructions for line 6 if you made a capital
gain election.
Lines 24 and 27. Use the following Tax
Rate Schedule to complete lines 24
and 27.

4

Tax Rate Schedule
If the amount on
line 23 or 26 is:

Over

Enter on line
24 or 27:
Of the
amount
over—

But not
over—

$0

$1,190

- - - - - 11%

$0

1,190

2,270

$130.90 + 12%

1,190

2,270

4,530

260.50 + 14%

2,270

4,530

6,690

576.90 + 15%

4,530

6,690

9,170

900.90 + 16%

6,690

9,170

11,440

1,297.70 + 18%

9,170

11,440

13,710

1,706.30 + 20%

11,440

13,710

17,160

2,160.30 + 23%

13,710

17,160

22,880

2,953.80 + 26%

17,160

22,880

28,600

4,441.00 + 30%

22,880

28,600

34,320

6,157.00 + 34%

28,600

34,320

42,300

8,101.80 + 38%

34,320

42,300

57,190

11,134.20 + 42%

42,300

57,190

85,790

17,388.00 + 48%

57,190

85,790

-----

31,116.00 + 50%

85,790

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