Treats account distributions from deductible contributions as taxable income. Provides an additional ten percent tax unless the distribution is made: (1) while the account holder is serving on active duty (including the 60-day period immediately preceding or following such period); or (2) after the account holder ceases to be a member of a reserve component or is transferred to such component's retired list.
Exempts an Armed Forces reserve savings account from taxation unless such account has ceased to be an Armed Forces reserve savings account due to a prohibited transaction by a contributor or a person for whose benefit such account was established.