T.C. Summary Opinion 2012-33
UNITED STATES TAX COURT
JEFFREY S. CARTER AND KANDIE ANDERSON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23646-10S. Filed April 17, 2012.
Jeffrey S. Carter and Kandie Anderson, pro sese.
Lewis A. Booth II, for respondent.
SUMMARY OPINION
DEAN, 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.
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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Unless otherwise indicated, subsequent section references are to the Internal
Revenue Code as amended, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
Respondent issued petitioners a notice of deficiency in which he determined a
deficiency of $2,000 for 2008. The issue for decision is whether petitioners are
liable for the section 72(t) additional tax for an early withdrawal from a qualified
retirement plan.
Background
Some of the facts have been stipulated and are so found. The stipulation of
facts and the attached exhibits are incorporated herein by reference. Petitioners
resided in Texas when they filed their petition.
On September 13, 2008, Hurricane Ike made landfall near Galveston, Texas,
as a strong category 2 storm. 1 Hardin County was one of the many counties in the
hurricane’s path. Subsequently, Hardin County was designated a Federal disaster
1
The Court takes judicial notice that hurricanes are classified by the intensity
of their sustained winds on the Saffir-Simpson Hurricane Wind Scale. The
categories range from 1 to 5, with a category 5 storm being the strongest. A
category 2 hurricane will have sustained winds between 96 and 110 miles per hour
that will cause extensive damage. National Oceanic and Atmospheric
Administration, Saffir-Simpson Hurricane Wind Scale,
http://www.nhc.noaa.gov/aboutsshws.php.
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area, and the residents there were eligible for limited relief from filing deadlines
under section 7508A. Petitioners lived in Hardin County in 2008.
Petitioners took an early distribution of $20,000 from petitioner husband’s
qualified retirement plan held by Principal Life Insurance Co. to repair property
damaged by the storm and to supplement income that they lost because of the storm.
Petitioners included the distribution in their income for 2008 and included Form
5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored
Accounts, with their 2008 joint Federal income tax return. On Form 5329
petitioners listed the $20,000 as an early distribution and claimed that the entire
amount was not subject to the additional tax on early distributions.
Respondent issued petitioners a notice of deficiency in which he determined
that they were liable for the 10% additional tax for an early distribution from a
qualified retirement plan.
Discussion
Generally, the Commissioner’s determinations are presumed correct, and the
taxpayer bears the burden of proving that those determinations are erroneous. Rule
142(a); see INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v.
Helvering, 290 U.S. 111, 115 (1933). In some cases the burden of proof with
respect to relevant factual issues may shift to the Commissioner under section
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7491(a). The issue for decision in this case is a legal issue. Therefore, the burden
of proof under section 7491(a) is not relevant to the Court’s decision.
“If any taxpayer receives any amount from a qualified retirement plan * * *,
the taxpayer’s tax under this chapter for the taxable year in which such amount is
received shall be increased by an amount equal to 10 percent of the portion of such
amount which is includible in gross income.” Sec. 72(t)(1). Section 72(t), however,
will not apply to any qualified hurricane distribution. Sec. 1400Q(a)(1).
A qualified hurricane distribution is defined as a distribution from an eligible
retirement plan: (1) made on or after August 25, 2005, and before January 1, 2007,
to an individual whose principal place of abode on or after August 28, 2005, is in
the Hurricane Katrina disaster area; (2) made on or after September 23, 2005, and
before January 1, 2007, to an individual whose principal place of abode on or after
September 23, 2005, is in the Hurricane Rita disaster area; and (3) made on or after
October 23, 2005, and before January 1, 2007, to an individual whose principal
place of abode on or after October 23, 2005, is in the Hurricane Wilma disaster
area. Sec. 1400Q(a)(4)(A). An individual must have also suffered an economic loss
by reason of one of the named hurricanes for his or her distribution to be a qualified
hurricane distribution. Id.
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Section 1400Q was extended first to the Kansas Disaster Area, which was
damaged by storms and tornadoes in 2007. Food, Conservation, and Energy Act of
2008, Pub. L. No. 110-246, sec. 15345, 122 Stat. at 2282. Section 1400Q was
again extended to the Midwestern Disaster Area damaged by severe storms,
tornadoes, and flooding in 2008. Emergency Economic Stabilization Act of 2008,
Pub. L. No. 110-343, sec. 702, 122 Stat. at 3912. Texas is not listed as a State
included in the Midwestern Disaster Area. Id.
Petitioners argue that because the Government created an exemption from the
10% additional tax for taxpayers affected by Hurricanes Katrina, Rita, and Wilma
and for taxpayers affected by the 2007 Kansas storms and tornadoes and the 2008
Midwestern severe storms, tornadoes, and flooding, it is only fair that they be
granted the same exemption.
Although the Court sympathizes with petitioners’ situation in dealing with
damage from Hurricane Ike, the Tax Court is a court of limited jurisdiction and
cannot make decisions solely on the basis of equity. See Commissioner v. McCoy,
484 U.S. 3, 7 (1987); Woods v. Commissioner, 92 T.C. 776, 784-787 (1989);
Estate of Rosenberg v. Commissioner, 73 T.C. 1014, 1017-1018 (1980); Hays
Corp. v. Commissioner, 40 T.C. 436, 442-443 (1963), aff’d, 331 F.2d 422 (7th Cir.
1964). Petitioners did not identify, and the Court is unable to find, any exemption
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for early distributions from qualified retirement plans for taxpayers who suffered
damages and economic losses from Hurricane Ike.2
Respondent’s determination is sustained.
To reflect the foregoing,
Decision will be entered
for respondent.
2
Petitioners’ early distribution is not one of the certain distributions to which
subsec. (t)(1) shall not apply. See sec. 72(t)(2).