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The excise tax can be avoided through a nontaxable distribution. A distribution that represents the return of a contribution made for any tax year to an IRA has to be made before the due date (including extensions) of the individual's tax return for the year. The distribution must include any net income earned by the contribution. The net income earned by the contribution is included in income for the tax year in which the contribution was made even if it is received in the following year. (IRC 408(d)(4))
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