T.C. Summary Opinion 2005-93
UNITED STATES TAX COURT
MALIA KRISTY AMBATA, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19572-04S. Filed July 19, 2005.
Malia Kristy Ambata, pro se.
Robert V. Boeshaar, for respondent.
COHEN, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
at the time that 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,
all section references are to the Internal Revenue Code in effect
for the year in issue.
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Respondent determined a deficiency of $1,720 in petitioner’s
Federal income tax for 2002. The issue for decision is whether
petitioner’s higher education expenses incurred in 2003 and 2004
can be applied to reduce the amount of a distribution in 2002
subject to the 10-percent additional tax of section 72(t)(1).
Background
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Spokane, Washington, at the time that she
filed her petition.
Petitioner withdrew $17,200 from her individual retirement
plan with Putnam Investments (Putnam) in 2002. Petitioner
planned to use the money for college expenses. However,
petitioner did not enroll in college until 2003.
Petitioner timely filed Form 1040A, U.S. Individual Income
Tax Return, for 2002. Petitioner reported the $17,200
distribution from Putnam; however, she did not report the 10-
percent additional tax under section 72(t)(2)(E). The IRS
determined that petitioner received an early distribution from
her qualified retirement plan and that the taxable amount of
this early distribution was subject to a 10-percent additional
tax on the taxable amount.
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Discussion
Under section 72(t), a 10-percent additional tax is imposed
on early distributions from a qualified retirement plan for the
taxable year in which the taxpayer receives the early
distribution. Petitioner does not dispute that she received an
early distribution from a qualified retirement plan in 2002.
The 10-percent additional tax, however, does not apply to
certain distributions. Sec. 72(t)(2). Section 72(t)(2)(E)
provides that the 10-percent additional tax on early
distributions does not apply to “Distributions to an individual
from an individual retirement plan to the extent such
distributions do not exceed the qualified higher education
expenses * * * of the taxpayer for the taxable year.” An
individual retirement plan is defined as an individual retirement
account and an individual retirement annuity (collectively IRA)
described in section 408(a) and (b), respectively.
Sec. 7701(a)(37). Qualified higher education expenses for
purposes of section 72(t)(2)(E) are defined by section 529(e)(3).
Sec. 72(t)(7)(A).
The parties stipulated that petitioner’s distribution was
from an IRA. Additionally, respondent concedes that petitioner
incurred qualified higher education expenses in 2003 and 2004.
Petitioner contends that the higher education expenses incurred
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in 2003 and 2004 should be used to reduce the amount of the
distribution subject to the 10-percent additional tax in 2002.
Under the express language of the statute, the qualified
higher education expenses must be incurred by the taxpayer in the
taxable year of the distribution. Sec. 72(t)(2)(E); Beckert v.
Commissioner, T.C. Memo. 2005-162. We have found no exception to
this requirement. Accordingly, petitioner’s higher education
expenses incurred in 2003 and 2004 cannot be applied to reduce
the amount of the distribution in 2002 subject to the 10-percent
additional tax.
To reflect the foregoing,
Decision will be entered
for respondent.