Taxation of distribution
In the case of a distribution to which subparagraph (A) applies—
(i)#
except as provided in clause (ii), such distribution shall not be included in gross income, and
(ii)#
any income on the excess deferral shall, for purposes of this chapter, be treated as earned and received in the taxable year in which such income is distributed.
No tax shall be imposed under section 72(t) on any distribution described in the preceding sentence.