T.C. Summary Opinion 2010-114
UNITED STATES TAX COURT
TIMOTHY D. NELSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4831-09S. Filed August 16, 2010.
Timothy D. Nelson, pro se.
Lesley Hale, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect when the petition was filed.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for the
year in issue, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
- 2 -
other court, and this opinion shall not be treated as precedent
for any other case.
Respondent determined a deficiency in petitioner’s 2006
Federal income tax of $885. The sole issue for decision is
whether petitioner is liable for the 10-percent additional tax
imposed by section 72(t) on an early distribution received in
2006 from a section 401(k) plan.
Background
Some of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulation of
facts and accompanying exhibits. Petitioner resided in the State
of California when the petition was filed.
During 2006, at 46 years of age, petitioner received a
distribution of $8,847 from a section 401(k) plan (401(k) plan).
When petitioner enrolled in the 401(k) plan he requested that 10
percent of any withdrawal be withheld as Federal income tax.
Therefore, when petitioner received his distribution, $885 was
withheld for Federal income tax. Petitioner used the net funds
distributed to pay a balance due for equipment purchased for use
in his line of work.
Petitioner timely filed a Form 1040EZ, Income Tax Return for
Single and Joint Filers With No Dependents. On the return,
petitioner reported the 401(k) plan distribution on the line for
wages, salary, and tips, and claimed (and received) a refund of
- 3 -
$846 (tax withheld of $885 less tax reported of $39). Petitioner
did not report the 10-percent additional tax on an early
distribution under section 72(t), believing that the Federal
income tax withheld from the distribution was sufficient to cover
any tax owed. In a notice of deficiency, respondent determined
that petitioner is liable for the 10-percent additional tax on
the early distribution pursuant to section 72(t).
Discussion
In general, the Commissioner’s determination as set forth in
the notice of deficiency is presumed correct, and the taxpayer
bears the burden of proving that the determination is in error.
See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Pursuant to section 7491(a), the burden of proof as to factual
matters shifts to the Commissioner under certain circumstances.
Petitioner has neither alleged that section 7491(a) applies nor
established his compliance with its requirements.2 Accordingly,
petitioner bears the burden of proof. See Rule 142(a).
Section 72(t)(1) imposes an additional tax on an early
distribution from a qualified retirement plan equal to 10 percent
of the portion of the amount that is includable in gross income.
2
Regardless of whether the additional tax under sec. 72(t)
is a penalty or an additional amount to which sec. 7491(c)
applies, and regardless of whether the burden of production with
respect to this additional tax would be on respondent, respondent
has satisfied any burden of production with respect to the
distribution. See H. Conf. Rept. 105-599, at 241 (1998), 1998-3
C.B. 747, 995.
- 4 -
A qualified retirement plan includes a 401(k) plan. See secs.
401(a), (k)(1), 4974(c)(1). The 10-percent additional tax is
intended to discourage premature distributions from retirement
plans. Dwyer v. Commissioner, 106 T.C. 337, 340 (1996); see also
S. Rept. 93-383, at 134 (1973), 1974-3 C.B. (Supp.) 80, 213.
The 10-percent additional tax does not apply to certain
distributions, including distributions: (1) To an employee age
59-1/2 or older, or (2) to an employee after separation from
service after attainment of age 55. Sec. 72(t)(2)(A)(i), (v).
Petitioner does not dispute that the $8,847 distribution
from his 401(k) plan was an early distribution from a qualified
plan. Indeed, petitioner properly included the distribution in
gross income.
When petitioner received the distribution from the 401(k)
plan, he was 46 years of age. Petitioner used the funds
withdrawn from the 401(k) plan to pay a balance due for equipment
purchased for use in his line of work. Regrettably for
petitioner, no exception applies for that purpose; therefore,
petitioner’s distribution remains subject to the 10-percent
additional tax. Accordingly, we must sustain respondent’s
determination that petitioner is liable for the section 72(t) 10-
percent additional tax.
Finally, regarding petitioner’s statements concerning the
accrual of interest, any claim for abatement is not cognizable in
- 5 -
an action for redetermination of deficiency. See sec. 6404(e),
(h); Rule 280(b); see also Bax v. Commissioner, 13 F.3d 54, 56-57
(2d Cir. 1993) (Tax Court ordinarily lacks jurisdiction to
consider interest on a deficiency in the context of an action for
redetermination of deficiency); Pen Coal Corp. v. Commissioner,
107 T.C. 249, 255 (1996) (same).
Conclusion
We have considered all of the arguments made by petitioner,
and, to the extent that we have not specifically addressed them,
we conclude that they do not support a result contrary to that
reached herein.
To reflect the foregoing,
Decision will be entered
for respondent.