T.C. Summary Opinion 2005-173
UNITED STATES TAX COURT
KEITH LAMAR JONES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6936-04S. Filed November 29, 2005.
Keith Lamar Jones, pro se.
William J. Gregg, for respondent.
PANUTHOS, Chief 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
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Revenue Code in effect for the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
Respondent determined a deficiency in petitioner’s Federal
income tax for the taxable year 2001 of $3,036.80. The sole
issue for decision is whether petitioner is liable under section
72(t) for the 10-percent additional tax on an early distribution
from a section 401(k) qualified retirement plan.
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time of filing his
petition, petitioner resided in Tucson, Arizona.
Petitioner was employed as an accountant by Deloitte &
Touche (Deloitte), an accounting firm, where he participated in
the Deloitte section 401(k) qualified retirement plan (401(k)
plan). Petitioner resigned from Deloitte in September 1999, to
begin full-time studies in a Ph.D. program at the University of
Arizona; he graduated in May 2004. In 2001, petitioner received
a distribution of $30,368.86 from the 401(k) plan. He used the
funds from the distribution to pay school expenses and to
purchase his first home. At the time of the distribution
petitioner had not reached 59½ years of age.1
1
There are no facts in this record indicating that any of
the other exceptions apply as set forth in sec. 72(t)(2)(A).
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Petitioner timely filed a Form 1040, U.S. Individual Income
Tax Return, for 2001. Chase Manhattan Bank issued to petitioner
a Form 1099-R, Distributions From Pensions, Annuities, Retirement
or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., showing
a gross and taxable distribution from his 401(k) plan for 2001 of
$30,368.86. Petitioner included the $30,368.86 distribution as
income on his return but did not report the additional tax for an
early distribution under section 72(t). In the notice of
deficiency, respondent determined that petitioner was liable for
a 10-percent additional tax on the early 401(k) plan distribution
pursuant to section 72(t).
Discussion
Taxpayers generally bear the burden of proving the
Commissioner’s determinations are incorrect. See Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). The burden as to a
factual issue relevant to the liability for tax may shift to the
Commissioner if the taxpayer introduces credible evidence and
satisfies the requirement to substantiate items. Sec.
7491(a)(2)(A). The facts are not in dispute in this case, and
section 7491(a) has no bearing in this case.
Section 72(t)(1) imposes an additional tax on an early
distribution from qualified retirement plans equal to 10 percent
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of the portion of such amount that is includable in gross
income.
Section 72(t)(2)(E) provides that the 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 commonly referred to as an IRA.
Section 72(t)(2)(F) provides, in relevant part, an exception to
the 10-percent additional tax for distributions to an individual
from an IRA which are qualified first-time home buyer
distributions. A “qualified first-time home buyer distribution”
is any payment or distribution received by an individual to the
extent such payment or distribution is used by the individual to
pay qualified acquisition costs with respect to a principal
residence of a first-time home buyer who is such individual.
Sec. 72(t)(8)(A).2
An IRA is defined as: “(A) an individual retirement account
described in section 408(a), and (B) an individual retirement
annuity described in section 408(b).” Sec. 7701(a)(37).
Retirement plans qualified under section 401(a) and 401(k) are
not included in the definition of “individual retirement plan,”
2
There is a lifetime limitation of $10,000 pursuant to sec.
72(t)(8)(B).
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under section 7701(a)(37). The qualified retirement plan from
which petitioner withdrew the $30,368.86 is a plan described in
section 401(k), and therefore the exceptions contained in section
72(t)(2)(E) and (F), regarding higher education expenses and
first-time home purchases respectively, do not apply.
Petitioner’s 401(k) plan is not an IRA as described by the
exceptions in section 72(t)(2)(E) and (F).
Petitioner’s assertion that he was informed that he could
have transferred the funds from the 401(k) plan to an IRA, that
the funds were left in the 401(k) plan for 2 years without
petitioner’s making any contributions, and that the difference
between a 401(k) plan and an IRA is a matter of form, does not
change the fact that the amount received by petitioner was not a
distribution from an IRA.
We recognize that the differences between a qualified
retirement plan and an IRA are highly technical. To this extent,
we sympathize with petitioner’s confusion. Regarding section
72(t), this Court has repeatedly held that it is bound by the
statutory exceptions enumerated in section 72(t)(2). See, e.g.,
Arnold v. Commissioner, 111 T.C. 250, 255-256 (1998); Schoof v.
Commissioner, 110 T.C. 1, 11 (1998).
Accordingly, respondent’s determination that petitioner is
liable for the 10-percent additional tax is sustained.
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Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered for
respondent.