T.C. Summary Opinion 2008-30
UNITED STATES TAX COURT
JAY ANDREW REINDL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8532-06S. Filed March 13, 2008.
Jay Andrew Reindl, pro se.
Steven M. Webster, for respondent.
SWIFT, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
when the petition was filed. Pursuant to section 7463(b), the
decision to be entered is not reviewable by any other court, and
this opinion shall not be treated as precedent for any other
case.
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Respondent determined a $3,720 additional tax under section
72(t)(1) relating to petitioner’s Federal income tax for 2004.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 2004.
The sole issue for decision is whether under section 72(t)
petitioner owes a 10-percent additional tax on an early
distribution from his individual retirement account (IRA).
Background
Some of the facts have been stipulated and are so found.
At the time the petition was filed, petitioner resided in
North Carolina.
Before 1998, petitioner worked and contributed to an IRA.
During 1998 through 2004, petitioner was employed at various
temporary jobs and borrowed money from family members to pay
personal expenses.
In 2004, petitioner received as his only source of taxable
income a $37,200 early distribution from his IRA. At the time of
the distribution, petitioner had not attained age 59-1/2, and
Federal income taxes of $7,440 were withheld from the
distribution to petitioner.
On his timely filed 2004 individual Federal income tax
return, petitioner reported the entire $37,200 IRA distribution
as taxable income, and he reported a $4,056 Federal income tax
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liability thereon. Petitioner, however, did not report a section
72(t) 10-percent additional tax on his early IRA distribution.
On audit, respondent determined that the section 72(t)
10-percent additional tax applied to petitioner’s taxable
$37,200 IRA distribution.
Discussion
Generally, a distribution to a taxpayer from an IRA before
the taxpayer attains age 59-1/2 is subject to a 10-percent
additional tax on the taxable amount of the distribution.
Sec. 72(t)(1). There are only narrow statutory exceptions to
this rule. See, e.g., Duronio v. Commissioner, T.C. Memo. 2007-
90 (exception under section 72(t)(2)(E) for early distribution to
pay qualified higher education expenses).
Petitioner does not argue that any recognized exception to
the general rule under section 72(t)(1) is applicable herein.
Petitioner, however, argues that his financial hardship should
except him from the 10-percent additional tax under section
72(t)(1).
While we sympathize with petitioner’s financial hardship, no
statutory or case authority provides an exception from imposition
of the additional tax under section 72(t) for financial
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hardship.1 Arnold v. Commissioner, 111 T.C. 250, 255 (1998);
Thompson v. Commissioner, T.C. Memo. 2007-327; Cole v.
Commissioner, T.C. Memo. 2006-44; Gallagher v. Commissioner, T.C.
Memo. 2001-34; Deal v. Commissioner, T.C. Memo. 1999-352; Duffy
v. Commissioner, T.C. Memo. 1996-556; Pulliam v. Commissioner,
T.C. Memo. 1996-354.
Petitioner also argues that his ignorance of the 10-percent
additional tax should except him from liability to pay it.
However, as a general rule, taxpayers are charged with knowledge
of the tax laws. Harrington v. Commissioner, 93 T.C. 297, 314
(1989).
We conclude that under section 72(t) petitioner is liable
for the 10-percent additional tax with respect to his $37,200
early IRA distribution.
To reflect the foregoing,
Decision will be entered
for respondent.
1
Not applicable to petitioner’s financial hardship (and not
effective before Dec. 21, 2005) is a statutory exception to the
imposition of the additional tax under sec. 72(t) applicable to
certain victims of hurricanes Katrina, Rita, and Wilma.
Sec. 1400Q(a)(1), (4)(A); Gulf Opportunity Zone Act of 2005,
Pub. L. 109-135, sec. 201(a), 119 Stat. 2596.