T.C. Summary Opinion 2003-123
UNITED STATES TAX COURT
GARY PAUL RUSH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 04557-01S. Filed September 2, 2003.
Gary Paul Rush, pro se.
T. Richard Sealy III and Catherine S. Tyson, for
respondent.
VASQUEZ, Judge: This case was heard pursuant to the
provisions of section 74631 in effect at the time petitioner
filed the petition. The decision to be entered is not reviewable
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code for the relevant
year.
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by any other court, and this opinion should not be cited as
authority.
Respondent determined a deficiency in petitioner’s Federal
income tax for 1998 in the amount of $2,668.2 The sole issue for
decision is whether petitioner is liable for a 10-percent
additional tax pursuant to section 72(t)(1) on distributions he
received, totaling $26,681, from his three qualified retirement
plans.
Background
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 he filed the
petition, petitioner resided in Las Cruces, New Mexico.
Petitioner is employed as a rural mail carrier in Las Cruces.
Petitioner had investments in three qualified retirement
plans. In 1998, petitioner cashed out these plans. He received
$18,127 from Nationsbank, N.A., $3,337 from Franklin Templeton
Trust Co., and $5,217 from IDS Life Ins. Co. Petitioner was 53
years old when he received the distributions.
Petitioner received three Forms 1099-R, Distributions From
Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc., for 1998 reflecting the distributions.
Petitioner reported the distributions on his Federal income tax
2
Amounts are rounded to the nearest dollar.
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return. Petitioner did not report the 10-percent additional tax.
Petitioner used the distributions to pay down debt on his
credit cards. He also invested some of the money. Petitioner
did not roll over any portion of the distribution into another
IRA or qualified retirement account. Petitioner did not receive
the distributions on account of a disability, as part of a series
of substantially equal periodic payments made for life, or for
medical care.
Discussion
Section 72(t) provides for a 10-percent additional tax on
early distributions from a qualified retirement plan. “The
legislative purpose underlying the section 72(t) tax is that
‘premature distributions from IRA’s frustrate the intention of
saving for retirement, and section 72(t) discourages this from
happening.’” Arnold v. Commissioner, 111 T.C. 250, 255 (1998)
(quoting Dwyer v. Commissioner, 106 T.C. 337, 340 (1996)).
A qualified retirement plan includes an IRA. See secs.
408(a), 4974(c). It is undisputed that Nationsbank, N.A.,
Franklin Templeton Trust Co. and IDS Life Ins. Co. were qualified
retirement plans.
The 10-percent additional tax does not apply to certain
distributions. 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
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employee attains the age of 59-1/2; (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 (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; or (6)
dividends paid with respect to stock of a corporation which are
described in section 404(k). Sec. 72(t)(2)(A). A limited
exclusion is also available for distributions made to an employee
for medical care expenses. See sec. 72(t)(2)(B).
Petitioner has the burden of proving his entitlement to any
of these exceptions.3 Bunney v. Commissioner, 114 T.C. 259, 265
(2000). Petitioner testified that he used the distributions to
reduce his debt. Although he reinvested some of the funds,
petitioner did not roll over any of the distributions into
another qualified retirement plan. Indeed, petitioner stated
that he no longer had any IRAs. The evidence shows that none of
3
Sec. 7491 is effective for court proceedings arising in
connection with examinations commencing after July 22, 1998.
Petitioner does not contend that sec. 7491 is applicable to his
case. Further, the resolution of this case does not depend on
which party has the burden of proof.
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the exceptions set forth in section 72(t)(2) apply in this case.
Thus, the early distributions made by petitioner are subject to
the additional 10-percent tax under section 72(t)(1).
In reaching our holding, we have considered all arguments
made by the parties, and to the extent not mentioned above, we
find them to be irrelevant or without merit.
To reflect the foregoing,
Decision will be
entered for respondent.