Form 4972 (2019)
Page 2
Section references are to the Internal Revenue
Code.
Future developments. For the latest
information about developments related to
Form 4972 and its instructions, such as
legislation enacted after they were published,
go to www.irs.gov/Form4972.
General Instructions
Purpose of Form
Use Form 4972 to figure the tax on a qualified
lump-sum distribution (defined below) you
received in 2019 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
For more information related to this topic, see
the following 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
doesn’t 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 qualified
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 figure the tax on the
distribution using the 20% capital gain
election, the 10-year tax option, or both. For
details, see Pub. 575.
Distributions That Don’t Qualify for the
20% Capital Gain Election or the 10-
Year Tax Option
The following distributions aren’t qualified
lump-sum distributions and don’t 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.
• 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 made 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(b) 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 under the
alternative annuity option 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 or 1040-SR (individuals), Form 1040-NR
(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, later.
10-year tax option. You can use Part III to
figure your tax on the lump-sum distribution
using the 10-year tax option whether or not
you make the 20% capital gain election.
Taxable amount. If Form 1099-R, box 2a, is
blank, you must figure the taxable amount to
complete Form 4972. For details, see Pub.
575.
Where to report. Report amounts from your
Form 1099-R either directly on your tax return
(Form 1040, 1040-SR, 1040-NR, or 1041) or
on Form 4972.
1. If you don’t use Form 4972, and you file:
a. Form 1040 or 1040-SR. Report the entire
amount from box 1 (Gross distribution) of
Form 1099-R on line 4c, and the taxable
amount on line 4d. If your pension or annuity
is fully taxable, enter the amount from box 2a
(Taxable amount) of Form 1099-R on line 4d;
don’t make an entry on line 4c.
b. Form 1040-NR. 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; don’t
make an entry on line 17a.
c. Form 1041. Report the amount on line 8.
2. If you don’t use Part III of Form 4972, but
use Part II, report only the ordinary income
portion of the distribution on Form 1040 or
1040-SR, lines 4c and 4d; on Form 1040-NR,
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, don’t
include any part of the distribution on Form
1040 or 1040-SR, lines 4c and 4d; on Form
1040-NR, 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), later.
• Box 8 (Other). Current actuarial value of an
annuity.
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 doesn’t 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 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
beneficiary. It doesn’t matter if the
distributions all occur in the same year or in
different years. File a separate Form 4972 for
each participant’s distribution.
TIP
An earlier election on Form 4972
or Form 5544 for a distribution
before 1987 doesn’t prevent you
from making an election for a
distribution after 1986 for the
same participant, provided the participant was
under age 59½ at the time of the pre-1987
distribution.