"...on or after the date on which the taxpayer attains age 591/2."
See https://www.law.cornell.edu/uscode/text/26/72
The part you quoted is either from the rules for a distribution from an "annuity contract" (26 USC § 72(q)(2)(A)) or from a "modified endowment contract" (26 USC § 72(v)(2)(A)).
The OP did not specify what he was asking about, but for a "qualified retirement plan", the relevant language is almost identical and is found in 26 USC § 72(t)(2)(A)(i), which provides that the 10% "additional tax" does not apply to distributions which are "made on or after the date on which the employee attains age 59 1/2". 26 USC § 72(t)(5) says that in the case of an IRA, the word "employee" includes any participant in the plan and includes the beneficiary of the IRA.
The statutory language here is very clear with respect to the relevant time being the time the distribution is taken, not the end of the year.
That said, I would think that the language is pretty much just as clear in 26 USC § 72(2)(A)(v), which provides that the additional tax does not apply to a distribution "made to an employee after separation from service after attainment of age 55". However, in
Notice 87-13, Q&A-20 (apparently not available on the IRS website), the IRS asserted that the additional tax does not apply to a distribution made after separation from service if "such separation from service occurred during or after
the calendar year in which the employee attained age 55" (emphasis mine).
It is important to understand that that the IRS does not have the power to override a statute even if the effect of doing so is favourable to taxpayers. If a stated taxpayer-friendly position in an IRS document is not legally defensible, the IRS is free to disavow it in assessing your return, or to take a different position in litigation before the courts.
Even assuming the interpretation asserted in Notice 87-13 is defensible, the two provisions do use slightly different language. 26 USC § 72(t)(2)(A)(v) refers to "after attainment of age 55", whereas 26 USC § 72(t)(2)(A)(i) and friends refer to "on or after the date on which the employee attains age 59 1/2". The latter appears even more explicit about the distribution having to be after "the date", not just in the relevant year. That said, the Notice 87-13 interpretation of "attainment of age 55" is honestly pretty strained itself, so I'm not sure anything turns on this slight difference in phrasing.
I am unable to locate any IRS advice on the meaning of "on or after the date on which the employee attains age 59 1/2", nor was I able to locate any court ruling which considered the meaning of the phrase.
In
El v. Commissioner, 144 TC No 9, the Tax Court considered a highly technical issue with no direct relation to this topic. Briefly stated, the petitioner El alleged that the IRS could not assess the 10% "additional tax" to his qualified retirement plan distribution because the IRS had failed to point to any evidence that El was under age 59 1/2 at the time of the distribution. To be clear, El did not suggest that he was actually 59 1/2 or older. His contention was the total lack of evidence on that point acted to prevent the IRS from assessing the 10% "additional tax".
The Court observed that the record did indeed lack any evidence as to "petitioner's age on the date on which he received the ... distribution". So, you will note that the Court casually assumed that the relevant date is the date on which the taxpayer received the distribution. However, this casual observation was not relevant to the issue the Court was deciding and thus it is known as "
dicta" and is not binding authority. When courts make statements on issues that are not fully briefed by the parties, they are prone to making an incorrect decision, which is part of the rationale of why these kind of statements are not authority in the same way as the actual decision is. That said, the statement is still in the opinion, and it's literally the only judicial consideration of the phrase that I can find.
As for the case, the IRS did not respond by parsing the age requirement. Rather, they responded with an even more technical argument. 26 USC § 7491(c) says that the IRS has the burden of production on any factual issue with "respect to the liability of any individual for any penalty, addition to tax, or additional amount". That means that if the IRS does not produce any evidence necessary to impose a "penalty, addition to tax, or additional amount", then the amount cannot be imposed.
However, the IRS argued that the 10% "additional tax" imposed by 26 USC § 72(t) was not a "penalty", "addition to tax", or "additional amount", but was rather an "additional tax", which according to the IRS is a quite different thing. The judge actually accepted that argument and therefore the lack of evidence on the taxpayer's age did not prevent the IRS from assessing the 10% tax.
Surely the IRS must address exactly how to determine your age for the 59 1/2 rule.
As a general rule, government agencies are not required to issue guidance on the laws they administer.
As the Supreme Court of Canada has poignantly said in a completely unrelated context, "[
i]ndividuals are ... expected to refrain from conduct that tests the boundaries of ... law lest they bear the consequences of the risk they have knowingly assumed":
R. v. Levkovic, 2013 SCC 25, [2013] 2 SCR 204, at para 63.
Basically, you are free to test the edge cases of the law, but when you do so, you bear the risk that you may not be successful.