T.C. Summary Opinion 2002-30
UNITED STATES TAX COURT
GREGORY SCOTT WEST, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2784-00S. Filed April 1, 2002.
Gregory Scott West, pro se.
Rachael J. Zepeda, for respondent.
GOLDBERG, Special Trial Judge: This case was heard pursuant
to the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority. Unless otherwise indicated,
subsequent section references are to the Internal Revenue Code in
effect for the year in issue.
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Respondent determined a deficiency in petitioner’s 1997
Federal income tax in the amount of $3,886.
The sole issue for decision is whether petitioner is liable
for a 10-percent additional tax under section 72(t)(1) on a
$38,855 distribution from an individual retirement account (IRA).
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner resided in Phoenix, Arizona.
In 1995, petitioner was employed as a manager at Alamo
Rental Car in Nashville, Tennessee. Petitioner worked for Alamo
for 12 years prior to March 1995, when he resigned due to failing
health. At that time, petitioner moved back to Phoenix, Arizona,
to be near his family. He did not consult with a medical doctor.
Although petitioner’s illness was not confirmed until 1998,
he was unable to work after March of 1995 as the symptoms of his
illness increased. In 1998, petitioner confirmed, through an
anonymous testing facility, that he has the human
immunodeficiency virus (HIV) which has developed into the
acquired immunodeficiency syndrome, or AIDS. Petitioner
testified that he had symptoms in 1995, “and I knew what the
problem was.” Petitioner also stated that “with HIV, you cannot
start the--the longer you can wait to start medication the
better, because you’re--the virus builds up resistance to the
medication.” Petitioner was hospitalized in 1999 and has been on
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medical treatment since then.
Petitioner testified that he did not seek medical attention
during 1996 through 1998 because he was attempting to secure
employment on a part-time basis and health insurance with no
“annual caps”. He further testified that “unfortunately, if you
keep it anonymous, you have greater chances of getting
employment, and you know, insurance.” Petitioner began working
for American Express in mid-1998. Petitioner works on a part-
time basis, approximately 32 hours per week. American Express
offers health insurance with no “annual caps” and a salary
continuance program under the Family and Medical Leave Act of
1993, Pub. L. 103-3, 107 Stat. 6. Petitioner testified that had
he found a company that would have provided the insurance he was
seeking and the part-time schedule, he would have been able to
work in 1997.
Prior to the year in issue petitioner individually owned an
IRA account. During 1997, petitioner withdrew $38,855 from his
IRA account. Petitioner did not roll over the IRA amounts into
another qualified employee retirement plan or individual
retirement plan. The amount withdrawn was reported on
petitioner’s 1997 Federal income tax return. Although the amount
of the distribution was reported on the return, petitioner did
not compute the 10-percent additional tax due for premature
distribution. Petitioner, who was born on March 7, 1957, was 40
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years of age in 1997 when the withdrawal was made.
In a notice of deficiency, respondent determined a
deficiency in the amount of $3,886. This amount represented a
10-percent additional tax on an early IRA distribution pursuant
to section 72(t).
Under section 408(d)(1), a distribution from an IRA is
taxable to the distributee in the year of distribution in the
manner provided under section 72. Section 408(d)(3) provides an
exception to the general rule for certain “rollovers” by the
distributee; namely, where a distribution is paid to the
distributee, and the distributee transfers the entire amount of
the distribution to an IRA or an individual retirement annuity
within 60 days of receipt.
Section 72(t)(1) provides for a 10-percent additional tax on
distributions from qualified retirement plans. Section 72(t)(2)
excludes qualified retirement plan distributions from the 10-
percent additional tax if the distributions are: (1) Made on or
after the date on which the employee attains the age of 59-1/2;1
(2) made to a beneficiary (or to the estate of the employee) on
or after the death of the employee; (3) attributable to the
employee’s being disabled within the meaning of section 72(m)(7);
(4) part of a series of substantially equal periodic payments
1
For the purpose of sec. 72(t), the term “employee” also
refers to participants in individual retirement accounts. Sec.
72(t)(5).
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(not less frequently than annually) made for the life (or life
expectancy) of the employee or joint lives (or joint life
expectancies) of such employee and his designated beneficiary;
(5) made to an employee after separation from service after
attainment of age 55;2 or (6) dividends paid with respect to
stock of a corporation which are described in section 404(k). A
limited exclusion is also available for distributions made to an
employee for medical care expenses. Sec. 72(t)(2)(B).
The parties do not dispute that petitioner’s IRA was a
qualified retirement plan and that petitioner did not “roll over”
his IRA distribution pursuant to section 408(d)(3). Therefore,
in order to prevail, petitioner must fall under one of the
exclusions under section 72(t)(2).
At issue here is the exception pertaining to distributions
attributable to an employee’s being disabled within the meaning
of section 72(m)(7). Sec. 72(t)(2)(A)(iii). Accordingly,
petitioner is not liable for the 10-percent additional tax for
early withdrawal if he was “disabled” during 1997.
Section 72(m)(7) defines the term “disabled” as follows:
For purposes of this section, an individual
shall be considered to be disabled if he is
unable to engage in any substantial gainful
activity by reason of any medically
determinable physical or mental impairment
which can be expected to result in death or
2
This provision, codified at sec. 72(t)(2)(A)(v), is not
applicable to premature IRA distributions. Sec. 72(t)(3)(A).
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to be of long-continued and indefinite
duration. An individual shall not be
considered to be disabled unless he furnishes
proof of the existence thereof in such form
and manner as the Secretary may require.
Because petitioner was not treated for HIV until 1999, he has no
medical records reflecting that he had HIV in 1997. Petitioner
testified that when he was hospitalized in March 1999 his CD4+ T
cell count and viral load readings indicated that the illness had
progressed from prior years. Petitioner relies on this inference
to prove that he was HIV positive during 1997. We note, however,
that petitioner failed to provide any medical records from any
year reflecting his CD4+ T cell or viral load levels.3
Further, at trial petitioner testified that had he found a
company, like American Express, that offered him a part-time work
schedule and medical insurance with no “annual caps”, then he
would have worked in 1997. Under the definition of disability
found in section 72(m), petitioner is not deemed disabled if he
was able to “engage in any substantial gainful activity” during
the year in issue. “Substantial gainful activity” refers to the
activity or a comparable activity in which the individual
customarily engaged prior to the disability. Sec. 1.72-17(f)(1),
Income Tax Regs. By petitioner’s own testimony, he was able to
3
Because petitioner failed to comply with requirements
to substantiate his illness, he failed to meet the requirements
of sec. 7491(a)(2)(A), as amended, so as to place the burden of
proof on respondent with respect to any factual issue relevant to
ascertaining liability for the tax deficiency in issue.
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work in 1997 at an activity comparable to the one in which he
customarily engaged, and thus he was not disabled as defined in
section 72(m)(7). See also Dwyer v. Commissioner, 106 T.C. 337
(1996); Fohrmeister v. Commissioner, T.C. Memo. 1997-159; Brown
v. Commissioner, T.C. Memo. 1996-421.
Petitioner testified that he contacted the Internal Revenue
Service (IRS) with respect to the 10-percent additional tax and
was informed by an IRS agent that he was not subject to the 10-
percent additional tax. This Court has previously held that the
authoritative sources of Federal tax law are statutes,
regulations, and judicial case law and not informal IRS sources.
Zimmerman v. Commissioner, 71 T.C. 367, 371 (1978), affd. without
published opinion 614 F.2d 1294 (2d Cir. 1979); Green v.
Commissioner, 59 T.C. 456, 458 (1972). Additionally, in order to
ensure uniform enforcement of the tax law, the Commissioner must
follow authoritative sources of Federal tax law and may correct
mistakes of law made by IRS agents or employees. Dixon v. United
States, 381 U.S. 68, 72 (1965); Massaglia v. Commissioner, 286
F.2d 258, 262 (10th Cir. 1961), affg. 33 T.C. 379 (1959). While
it is unfortunate that petitioner may have received unhelpful or
incorrect tax advice from an IRS employee, that advice does not
have the force and effect of law.
Although we are very sympathetic to petitioner’s medical
situation, he has failed to show that he was disabled, as defined
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in section 72(m)(7), during the year in issue. Since petitioner
fails to qualify for any of the statutory exceptions under
section 72(t)(2), we hold that he is liable for the 10-percent
additional tax on distributions from a qualified retirement plan
for 1997 as provided in section 72(t)(1). Respondent is
sustained on this issue.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.