569

ANDREW WAYNE ROBERTS, PETITIONER v. COMMISSIONER

OF INTERNAL REVENUE, RESPONDENT

Docket No. 23405–10. Filed December 30, 2013. 

During 2008 P’s former wife (W) submitted withdrawal 

requests bearing what purported to be P’s signatures to two 

companies administering IRAs P owned. The requests were 

prepared and submitted without P’s knowledge, and P’s signatures on the requests were forged. The companies processed 

distributions from P’s IRAs in accordance with the requests 

and issued checks made payable to P. W received and 

endorsed the checks by forging P’s signatures, deposited the 

checks into a joint account that only she used, and used the 

proceeds from the checks for her personal benefit. P did not 

know about the withdrawals until sometime in 2009 when he 

received Forms 1099–R with respect to the purported distributions, and he did not learn of W’s involvement in cashing the 

distribution checks and using the proceeds until the divorce 

proceeding in 2009. W electronically filed an income tax 

return for P for 2008 that she prepared using a filing status 

of single. She did not report the IRA withdrawals as income 

on P’s return. R determined that P is the distributee who 

must include the withdrawals in income pursuant to I.R.C. 

sec. 408(d) and that P is liable for the I.R.C. sec. 72(t) additional tax on early distributions from qualified retirement 

plans. R also determined that P is liable for an accuracyrelated penalty under I.R.C. sec. 6662(a) due to a substantial 

understatement of income tax. Held: P is not a ‘‘payee’’ or 

‘‘distributee’’ within the meaning of I.R.C. sec. 408(d)(1). Held, 

further, P is not liable for the I.R.C. sec. 72(t) additional tax 

on early distributions from qualified retirement plans. Held, 

further, P’s proper filing status for 2008 is married filing separately. Held, further, P is liable for the accuracy-related penalty under I.R.C. sec. 6662(a) to the extent the adjustments 

570 141 UNITED STATES TAX COURT REPORTS (569) 

1 Unless otherwise indicated, all section references are to the Internal 

Revenue Code (Code) in effect for the year in issue, and all Rule references 

are to the Tax Court Rules of Practice and Procedure. All monetary 

amounts are rounded to the nearest dollar. 

2Petitioner concedes that he received wage income of $39,232 and interest income of $74 for 2008. 

P conceded result in a substantial understatement of income 

tax. 

John A. Clynch and Scott A. Schumacher, for petitioner. 

Connor J. Moran and Dean H. Wakayama, for respondent. 

MARVEL, Judge: Respondent determined a deficiency in 

petitioner’s 2008 Federal income tax of $13,783 and an 

accuracy-related penalty of $3,357 under section 6662(a). 1 In 

an amendment to answer respondent asserted an increased 

deficiency of $14,177 and an increased accuracy-related penalty of $3,435. After concessions, 2 the issues for decision are: 

(1) whether petitioner must include in taxable income for 

2008 withdrawals from his individual retirement accounts 

(IRAs) of $37,020 that his former wife took without his 

knowledge or permission and that he did not receive directly 

or indirectly during 2008; (2) if so, whether he is liable for 

the 10% additional tax on early distributions under section 

72(t); (3) whether petitioner’s proper filing status for 2008 is 

married filing separately; and (4) whether petitioner is liable 

for the section 6662(a) penalty. 

FINDINGS OF FACT 

Some of the facts have been stipulated and are so found. 

The stipulation of facts is incorporated herein by this reference. Petitioner resided in the State of Washington when 

he petitioned this Court. 

I. Background 

In 1990 petitioner married Cristie Smith (Ms. Smith). 

During 2008 petitioner was an employee of the U.S. Air 

Force, and Ms. Smith was an employee of Bethel Transportation. Petitioner and Ms. Smith separated for a period in 

2008, permanently separated in January 2009, and were 

divorced in March 2010. 

(569) ROBERTS v. COMMISSIONER 571

3The Washington Mutual account was later transferred to Chase Bank. 

We refer to the Washington Mutual/Chase Bank account as the Washington Mutual account. 

II. Financial Accounts 

Petitioner and Ms. Smith maintained joint checking 

accounts at Washington Mutual and Harborstone Federal 

Credit Union (Harborstone). 3 Although the accounts were 

titled in joint name, petitioner exclusively used the 

Harborstone account during and after 2008 and Ms. Smith 

exclusively used the Washington Mutual account. Petitioner 

did not have a checkbook for, write checks on, or make withdrawals from the Washington Mutual account, and he did 

not receive or review the bank statements for the Washington Mutual account during 2008. Petitioner did not know 

about, authorize, or benefit from any deposits into, or withdrawals from, the Washington Mutual account during 2008 

and after. 

III. IRA Withdrawals 

A. IRA Accounts 

Petitioner owned IRA accounts at AIG SunAmerica Life 

Insurance Co. (SunAmerica) and ING. 

B. SunAmerica IRA 

In September 2008 SunAmerica received a request 

purportedly from petitioner to withdraw $9,000 from his 

SunAmerica IRA. Petitioner did not make the request, and 

he did not authorize anyone else to make it on his behalf. 

SunAmerica received the withdrawal request from a fax 

machine at Bethel Transportation. Petitioner did not ask Ms. 

Smith or anyone else at Bethel Transportation to fax the 

withdrawal request to SunAmerica. 

The withdrawal request is signed ‘‘Andy Roberts’’. The signature is not petitioner’s signature and was forged. 

SunAmerica issued a check made payable to petitioner 

from his SunAmerica IRA pursuant to the faxed withdrawal 

request. The SunAmerica check was endorsed ‘‘Andy Roberts’’ and was deposited into the Washington Mutual account. 

Petitioner, however, did not endorse the SunAmerica check, 

and he did not authorize anyone to sign the check on his 

572 141 UNITED STATES TAX COURT REPORTS (569) 

4Withdrawal requests related to the ING distributions are not part of 

the record. We find credible petitioner’s testimony that he was unaware of 

the ING distributions until sometime in 2009 and infer from the record 

that he did not request any distribution from his ING IRA account during 

2008. 5 Respondent contends that petitioner directly benefited from the IRA 

withdrawals in 2008. We disagree. Petitioner and Ms. Smith shared expenses during their marriage. Petitioner deposited his paycheck into the 

Harborstone account and made the mortgage loan and car payments. Petitioner also paid bills such as the cable, electric, and insurance bills. Ms. 

Smith deposited her paycheck into the Washington Mutual account and 

used that account to pay the phone bill, buy groceries, and purchase clothing for the children. 

Nothing in the record suggests that the IRA withdrawals were used to 

pay any expenses that were petitioner’s responsibility. Instead, the record 

shows that Ms. Smith used the IRA withdrawals to make large purchases 

at retail stores, such as Old Cannery Furniture; Bed, Bath & Beyond; Ikea; 

and Target; to take a trip to Disneyland; and to set up a household separate from petitioner’s. These expenditures were for the sole benefit of Ms. 

Smith and were made without petitioner’s knowledge. We do not find credible any testimony by Ms. Smith to the contrary. 

behalf. The endorsement on the SunAmerica check is not 

petitioner’s signature and was forged. 

C. ING IRA 

Petitioner did not make any request for any distribution 

from his ING IRA account during 2008. 4 Nevertheless, in 

November 2008 ING issued a $9,000 check made payable to 

petitioner from his ING IRA. In December 2008 ING issued 

another check, for $18,980, made payable to petitioner from 

his ING IRA. Each ING check was endorsed ‘‘Andy Roberts’’ 

and was deposited into the Washington Mutual account. Petitioner, however, did not endorse either of the ING checks, 

and he did not authorize anyone to sign the checks on his 

behalf. Petitioner’s signatures on the checks were forged. 

IV. Use of Misappropriated IRA Funds 

Petitioner did not receive the ING and SunAmerica IRA 

distribution checks during 2008, and he was unaware that 

the checks had been issued. Petitioner also was unaware that 

the IRA distribution checks had been deposited into the 

Washington Mutual account. 5

We infer from the record and find that Ms. Smith or someone on her behalf forged petitioner’s signature on each of the 

(569) ROBERTS v. COMMISSIONER 573

6Ms. Smith frequently overdrew her Washington Mutual account during 

2008. The Washington Mutual account bank records show overdraft 

charges of $3,522 for 2008. 

7 In one instance, Ms. Smith made a withdrawal of $17,345 from the 

Washington Mutual account for the purpose of setting up her separate 

household. 

8 Beginning with the Washington Mutual statement for the period of December 12, 2008, through January 14, 2009, Washington Mutual lists Ms. 

Smith’s separate address in Puyallup, Washington, as the account holders’ 

address. Washington Mutual bank statements for periods before December 

12, 2008, list petitioner and Ms. Smith’s address in Spanaway, Washington, as the account holders’ address. 

9Ms. Smith filed for divorce from petitioner on February 18, 2009. The 

Pierce County, Washington, Superior Court entered a decree of dissolution 

of petitioner and Ms. Smith’s marriage on March 26, 2010. 

distribution requests and the endorsements on the checks, 

and she deposited the checks into the Washington Mutual 

account that only she used. In the months following the IRA 

withdrawals Ms. Smith made large expenditures from the 

Washington Mutual account to, among other things, 6 establish a separate household from petitioner. 7 From midNovember 2008 through mid-January 2009 Ms. Smith wrote 

checks and made withdrawals from the Washington Mutual 

account totaling $41,257; her payroll deposits from Bethel 

Transportation for this period totaled only $3,950. 8

Petitioner first learned of the unauthorized withdrawals 

from his IRA accounts when SunAmerica and ING issued to 

him Forms 1099–R, Distributions From Pensions, Annuities, 

Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., in 2009. When he received the first Form 1099– 

R, petitioner thought that he had been the victim of a theft, 

but he had no reason to believe at the time that Ms. Smith 

was involved. By the time of his divorce proceeding in 2009, 

however, petitioner had learned that Ms. Smith had deposited the checks into the Washington Mutual account and had 

used the proceeds for her benefit. 9 During the divorce proceeding petitioner advised the trial court that Ms. Smith had 

taken and used the funds from his IRA accounts without his 

knowledge or permission. In 2010 the division of assets in 

the trial court’s decree of dissolution took into account that 

574 141 UNITED STATES TAX COURT REPORTS (569) 

10 Although the parties jointly stipulate that the ‘‘decree of dissolution 

was made taking into account the fact that funds, including funds from the 

SunAmerica IRA and the ING IRA had allegedly already been withdrawn 

by petitioner’s wife’’, we do not know what the stipulation means, and we 

cannot conclude from the stipulation as drafted that petitioner received 

any economic benefit in the form of an adjustment to the property that Ms. 

Smith was awarded in the divorce proceeding. 11The actual refund deposit to the Washington Mutual account from the 

Department of the Treasury was $3,092. We are unable to resolve the discrepancy between the claimed refund amount and the actual refund 

amount from the information in the record. 12 Respondent issued a tax refund of $3,092 and deposited the refund 

electronically into the Washington Mutual account on April 24, 2009. On 

Ms. Smith had withdrawn funds from petitioner’s IRA 

accounts. 10

V. Petitioner’s Tax Reporting and Notice of Deficiency 

For each year of their marriage until 2008, Ms. Smith prepared and filed a joint income tax return for petitioner and 

herself. Sometime before April 2009, petitioner, although 

separated from Ms. Smith, discussed with her the preparation and filing of a joint income tax return for 2008, and he 

understood from that conversation that he and Ms. Smith 

would still file a joint return. He gave his tax information to 

her so that she could prepare the 2008 joint return. However, 

without telling him, Ms. Smith prepared and filed separate 

returns for herself and petitioner. Ms. Smith prepared her 

return for 2008 using married filing separate filing status, 

but she prepared petitioner’s return using single filing 

status. On petitioner’s return Ms. Smith underreported petitioner’s wage income by $3,000, claimed an overstated credit 

for withheld tax (the credit was overstated by $3,000), and 

omitted $74 of interest income. As prepared, petitioner’s 

return claimed that he was entitled to a refund of a $3,357 

overpayment, which was electronically deposited into Ms. 

Smith’s Washington Mutual account. 11

Ms. Smith filed petitioner’s return electronically on April 

13, 2009. She did not show the return to petitioner or give 

him a copy of the return, despite his asking for one. Thus, 

petitioner did not sign or see his 2008 tax return before its 

filing. Ms. Smith did not report the withdrawals from the 

SunAmerica and ING IRAs as income on either the return 

she prepared for petitioner or her return. 12

(569) ROBERTS v. COMMISSIONER 575

the same day as the refund deposit Ms. Smith withdrew $3,000 from the 

Washington Mutual account. Petitioner was unaware at the time that respondent had issued a refund with respect to his 2008 return, and he did 

not receive it or benefit from it. 13The term ‘‘Secretary’’ means ‘‘the Secretary of the Treasury or his delegate’’, sec. 7701(a)(11)(B), and the term ‘‘or his delegate’’ means ‘‘any officer, employee, or agency of the Treasury Department duly authorized by 

the Secretary of the Treasury directly, or indirectly by one or more redelegations of authority, to perform the function mentioned or described in the 

context’’, sec. 7701(a)(12)(A)(i). 

On August 2, 2010, respondent issued to petitioner a notice 

of deficiency. In the notice of deficiency respondent determined that petitioner had failed to report income of $37,020 

attributable to the IRA withdrawals and adjusted the 

resulting tax deficiency by the amount of the overstated 

withholding credit. Respondent increased the deficiency in an 

amendment to answer to account for the incorrect filing 

status used on petitioner’s 2008 return. 

OPINION 

I. Burden of Proof 

Ordinarily, the Commissioner’s determinations in a notice 

of deficiency are presumed correct, and the taxpayer bears 

the burden of proving that the determinations are erroneous. 

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). 

The burden of proof shifts to the Commissioner, however, if 

the taxpayer produces credible evidence with respect to an 

issue, the taxpayer complied with the substantiation requirements, and the taxpayer cooperated with the Secretary 13

regarding all reasonable requests for information. Sec. 

7491(a); see also Higbee v. Commissioner, 116 T.C. 438, 440– 

441 (2001). Further, if the Commissioner raises a new issue 

or seeks an increase in the deficiency, the Commissioner 

bears the burden of proof as to the new issue or increased 

deficiency. See Rule 142(a)(1). 

The U.S. Court of Appeals for the Ninth Circuit, to which 

an appeal in this case would lie absent a stipulation to the 

contrary, see sec. 7482(b)(1)(A), (2), has held that for the 

presumption of correctness to attach to the notice of deficiency in unreported income cases, the Commissioner must 

establish some evidentiary foundation connecting the taxpayer with the income-producing activity, see Weimerskirch v. 

576 141 UNITED STATES TAX COURT REPORTS (569) 

14Petitioner does not assert nor has he proven that he is entitled to a 

shift in the burden of proof under sec. 7491(a). 

Commissioner, 596 F.2d 358, 361–362 (9th Cir. 1979), rev’g 

67 T.C. 672 (1977), or demonstrating that the taxpayer actually received unreported income, see Edwards v. Commissioner, 680 F.2d 1268, 1270–1271 (9th Cir. 1982). If the 

Commissioner introduces some evidence that the taxpayer 

received unreported income, the burden shifts to the taxpayer, who must establish by a preponderance of the evidence that the unreported income adjustment was arbitrary 

or erroneous. See Hardy v. Commissioner, 181 F.3d 1002, 

1004 (9th Cir. 1999), aff ’g T.C. Memo. 1997–97. 

The record contains copies of the Commissioner’s computer 

records that reflect receipt of Forms 1099–R showing taxable 

distributions of $37,020 to petitioner, and the parties do not 

dispute that the distribution checks were issued and made 

payable to petitioner. Because respondent has introduced evidence that petitioner received unreported IRA distributions 

during 2008, the presumption of correctness attaches to 

respondent’s determination in the notice of deficiency. Petitioner bears the burden of proof with respect to that determination. 14 See Rule 142(a); Hardy v. Commissioner, 181 

F.3d at 1004. Respondent, however, bears the burden of proof 

with respect to the increased deficiency attributable to the 

allegedly erroneous filing status. See Rule 142(a)(1). 

II. Analysis 

Section 408(d)(1) provides that any amount paid or distributed out of an IRA is included in the gross income of the 

payee or distributee as provided under section 72. Generally, 

the payee or distributee of an IRA is the participant or beneficiary who is eligible to receive funds from the IRA. Bunney 

v. Commissioner, 114 T.C. 259, 262 (2000) (citing Darby v. 

Commissioner, 97 T.C. 51, 58 (1991)). However, this is not 

always the case. The taxable distributee under section 

408(d)(1) may be someone other than the recipient or purported recipient eligible to receive funds from the IRA. 

Indeed, we have previously rejected the contention that the 

recipient of an IRA distribution is automatically the taxable 

distributee. See Bunney v. Commissioner, 114 T.C. at 262. 

(569) ROBERTS v. COMMISSIONER 577

Neither the Code nor applicable regulations define the 

terms ‘‘payee’’ or ‘‘distributee’’ or provide specific guidance on 

when an amount is considered to have been paid or distributed to a payee or distributee under section 408(d)(1). This 

is not surprising because under most circumstances the 

payee or distributee is easily identifiable and the fact of the 

distribution can normally be ascertained without difficulty. 

In this case, however, we find that the distribution requests 

were forged, and the endorsements on the checks that were 

issued pursuant to the forged requests were also forged. Petitioner, the purported payee on the checks, did not know of 

or authorize the requests, and he did not receive or cash the 

checks. These facts present an issue of first impression under 

section 408(d)(1)—whether IRA withdrawals made pursuant 

to forged withdrawal requests that are not received by the 

purported distributee or used by the purported distributee 

for his or her economic benefit are distributions includible in 

the gross income of the purported distributee under section 

408(d). Common sense dictates that the answer must be no, 

and our findings of fact and analysis support that answer. 

A. Distributions From Petitioner’s IRAs 

Petitioner credibly testified that he did not sign the 

SunAmerica withdrawal request, endorse the SunAmerica 

IRA distribution check, endorse the ING IRA distribution 

checks, or authorize any person to do so on his behalf. 

Indeed, petitioner credibly testified that he did not learn of 

either the SunAmerica or ING IRA distributions until he 

received the Forms 1099–R sometime in 2009. Petitioner further testified that he signs his name ‘‘Andrew W. Roberts’’ 

and dates his signature with the day first, then the month 

abbreviated, and finally the year. He formed the habit of 

signing and dating his name in this manner during his time 

in the military. 

The IRA distribution checks were all endorsed ‘‘Andy Roberts’’, and the SunAmerica withdrawal request was not dated 

in petitioner’s customary format. The SunAmerica withdrawal request was faxed from Ms. Smith’s place of employment, and all of the IRA checks were deposited into the bank 

account used by Ms. Smith. We find that Ms. Smith or someone on her behalf, and not petitioner, signed the withdrawal 

requests and the checks, and that the signatures were made 

578 141 UNITED STATES TAX COURT REPORTS (569) 

15 Respondent filed a motion in limine to exclude certain documents, testimony, and cross-examination related to a dismissed criminal charge 

against Ms. Smith. We denied respondent’s motion and at trial permitted 

cross-examination related to the dismissed criminal charge. However, we 

base our findings regarding Ms. Smith’s credibility solely on our observations of her as a witness and our review of certain exhibits and not on any 

testimony regarding the dismissed criminal charge. 16The SunAmerica IRA distribution check of $9,000 was deposited to the 

Washington Mutual account during the statement period of August 14 

through September 12, 2008. The Washington Mutual account had a balance of –$3 on August 14, 2008. The first ING IRA distribution check of 

$9,000 was deposited to the Washington Mutual account during the statement period of November 15 through December 11, 2008. The Washington 

Mutual account had a balance of –$1,000 on November 15, 2008. Finally, 

the second ING IRA distribution check of $18,980 was deposited to the 

Washington Mutual account during the statement period of December 12, 

2008, through January 14, 2009. The Washington Mutual account had a 

balance of $2,087 on December 12, 2008. 

without petitioner’s authorization. In effect, Ms. Smith perpetrated a fraud on, and stole from, the companies administering petitioner’s IRAs. 

Petitioner credibly testified that he did not receive the IRA 

checks, and the record shows that the checks were deposited 

into an account that was joint in name only; the account was 

exclusively used by Ms. Smith. Petitioner did not have a 

checkbook for the Washington Mutual account, did not make 

any withdrawals from the Washington Mutual account, and 

was generally unaware of the use of the Washington Mutual 

account. Ms. Smith, however, routinely used the Washington 

Mutual account for her personal expenditures, which were 

often excessive and which generated numerous overdraft 

charges. We do not find credible Ms. Smith’s testimony 15

that she was unaware of the source of the deposits made to 

the Washington Mutual account when, in many instances, 

the deposits dwarfed the account’s balance at the time. 16 Ms. 

Smith’s testimony is particularly unbelievable in the light of 

the evidence that she made large cash withdrawals and purchases in close proximity to the deposits of the IRA checks. 

In short, Ms. Smith, and not petitioner, received, spent, and 

benefited from the IRA distributions. 

B. Parties’ Arguments 

Respondent takes a strict view of petitioner’s obligation to 

report as income withdrawals from his IRA accounts. He 

(569) ROBERTS v. COMMISSIONER 579

17 Because we hold that petitioner was not a payee or distributee within 

the meaning of sec. 408(d)(1), we need not address this contention. 

argues that petitioner must report the withdrawals as taxable distributions because petitioner was the owner of the 

IRAs and was the person entitled to receive distributions 

from the IRAs. Respondent further argues that the IRA 

account withdrawals were deposited into the Washington 

Mutual account, which was jointly owned by petitioner and 

Ms. Smith, and were used in part to pay ‘‘family living 

expenses during the time petitioner and his wife resided 

together’’, medical expenses, and a family Verizon Wireless 

account. Respondent emphasizes that petitioner ‘‘never 

attempted to return the funds to the IRAs after he discovered the payments nor did he otherwise contest the distributions.’’ Citing Priv. Ltr. Rul. 201119040 (May 13, 2011) as an 

example, respondent also states that, if IRA funds were 

stolen and the owner of the IRA received a refund of the 

stolen funds, the owner could deposit the refund into the IRA 

as a tax-free rollover. However, because petitioner took no 

steps to replenish his IRAs for the allegedly stolen amounts, 

respondent contends that petitioner must recognize income 

equal to the distribution amounts in 2008. 

Petitioner contends that because the IRA withdrawals 

were made pursuant to forged withdrawal requests, the distribution checks were stolen, the signatures on the distribution checks were forged, and he did not receive an economic 

benefit from the distributions, we should hold that he is not 

a payee or distributee within the meaning of section 

408(d)(1). Petitioner also contends that under Washington 

State law, no distribution occurred from either the 

SunAmerica IRA or the ING IRA because he did not 

authorize the IRA withdrawal requests or the endorsements 

on the IRA distribution checks. Therefore, petitioner contends that as a matter of State law no amount was paid or 

distributed within the meaning of section 408(d)(1). 17

We first address whether petitioner is a distributee within 

the meaning of section 408(d)(1) when he did not authorize 

the withdrawal requests, did not receive or endorse the IRA 

distribution checks, and did not receive an economic benefit 

from the distributions. We then address whether petitioner is 

a distributee within the meaning of section 408(d)(1) because 

580 141 UNITED STATES TAX COURT REPORTS (569) 

he allegedly benefited from the IRA distributions or because 

he failed to file a claim against ING or SunAmerica for an 

unauthorized payment. 

C. Whether Petitioner Is a Payee or Distributee Within the 

Meaning of Section 408(d)(1) 

As an initial matter, respondent contends that petitioner 

must include in income the amounts withdrawn from his 

IRAs irrespective of State law and even though he did not 

consent to the distributions and was not aware that the distributions occurred. Respondent relies on our opinions in 

Bunney v. Commissioner, 114 T.C. at 262, and Vorwald v. 

Commissioner, T.C. Memo. 1997–15, to support his contentions. 

In Bunney, we held that the distributee or payee of a distribution from an IRA is generally ‘‘ ‘the participant or beneficiary who, under the plan, is entitled to receive the distribution.’ ’’ Bunney v. Commissioner, 114 T.C. at 262 

(quoting Darby v. Commissioner, 97 T.C. at 58). However, we 

also rejected the Commissioner’s argument in Bunney that 

the recipient of an IRA distribution is automatically the taxable distributee, noting that ‘‘in the context of a distribution 

from a pension plan the term ‘distributee’ is not necessarily 

synonymous with ‘recipient.’ ’’ Id. (citing Estate of Machat v. 

Commissioner, T.C. Memo. 1998–154). We reject respondent’s 

contention that petitioner, as the purported recipient of the 

IRA distributions, is automatically the taxable distributee 

under Bunney. 

In Vorwald, we held that a distribution of funds from an 

IRA pursuant to a court-ordered garnishment resulted in a 

taxable distribution to the taxpayer. The garnishment was 

ordered to satisfy the taxpayer’s child support obligation. The 

taxpayer in Vorwald did not consent to the distribution from 

his IRA and did not realize the distribution had occurred 

until he was notified of the distribution by the Commissioner. Nevertheless, we held that the distribution was 

income to the taxpayer because it discharged his legal child 

support obligation and was thus the equivalent of receipt by 

him. 

The distributions from petitioner’s IRAs were not court 

ordered and did not satisfy a legal obligation that petitioner 

owed to Ms. Smith or any other party. Instead, the distribuVerDate Mar 15 2010 12:15 Feb 03, 2015 Jkt 000000 PO 00000 Frm 00012 Fmt 3857 Sfmt 3857 V:\FILES\BOUNDV~1.WIT\BVACDB~1.141\ROBERTS JAMIE
(569) ROBERTS v. COMMISSIONER 581

18We express no opinion as to whether petitioner’s failure to exercise 

available remedies under Washington law resulted in a constructive distribution from the IRA accounts in a later tax year. 

tions were unauthorized and completed without petitioner’s 

knowledge. In addition, petitioner did not receive any benefit, 

directly or indirectly, from the distributions in 2008 as Ms. 

Smith used the funds from the unauthorized withdrawals to 

set up her postseparation household, take a vacation and a 

family trip, and pay expenses for which she was liable. 

Vorwald is distinguishable because the funds at issue in that 

case were legally obtained and were applied to a liability for 

which the taxpayer was personally liable. Because petitioner 

did not request, receive, or benefit from the IRA distributions, we conclude that he was not a payee or distributee 

within the meaning of section 408(d)(1). 

D. Whether Petitioner Is a Distributee or Payee on the Basis 

of Ratification or His Failure To Assert a Claim for an 

Unauthorized Payment 

Respondent further contends that petitioner had one year 

to discover and report the unauthorized signatures and that 

petitioner’s failure to so report precludes any remedies under 

Washington law, thus making the distributions taxable to 

petitioner. In other words, according to respondent, State law 

would not require ING and SunAmerica to restore any 

amounts paid out of petitioner’s IRA accounts since he did 

not report the unauthorized signatures within one year. 

Therefore, respondent contends that petitioner received a distribution within the meaning of section 408(d)(1). 

Under Washington’s version of the Uniform Commercial 

Code (U.C.C.), notwithstanding care or lack of care, for an 

account of an individual the individual must discover and 

report an unauthorized signature within one year. See Wash. 

Rev. Code Ann. sec. 62A.4–406(f) (West 2003). If the individual does not do so, he may not recover for the unauthorized signature. Id. But, even if Wash. Rev. Code Ann. sec. 

62A.4–406(f) precludes a remedy to petitioner against ING 

and SunAmerica, that does not mean that as of the end of 

2008 petitioner had received a taxable distribution from his 

IRA accounts. 18

582 141 UNITED STATES TAX COURT REPORTS (569) 

19Whether there is an economic benefit accruing to the taxpayer is the 

crucial factor in determining whether there is gross income. See, e.g., 

Afshar v. Commissioner, T.C. Memo. 1981–241 (citing James v. United 

States, 366 U.S. 213 (1961), Commissioner v. Glenshaw Glass Co., 348 U.S. 

426 (1955), and Rutkin v. United States, 343 U.S. 130 (1952)), aff ’d without published opinion, 692 F.2d 751 (4th Cir. 1982). 

Under respondent’s analysis, petitioner acquiesced to the 

distributions by not making a claim under Washington law 

and by accepting the proposed settlement in his divorce, 

which the parties stipulated was ‘‘taken into account’’ in the 

decree of dissolution. Under Washington law, it appears petitioner could have made a claim to restore his IRA accounts 

within one year of the unauthorized withdrawals, but even 

if so, that right did not expire until sometime in 2009. Similarly, the decree of dissolution allocating property between 

petitioner and Ms. Smith was not entered until 2010. At 

best, under respondent’s theory, petitioner did not ratify the 

IRA distributions until 2009 at the earliest. Accordingly, any 

failure by petitioner to exercise his rights under Washington 

law and any purported benefit he received in the divorce does 

not affect our conclusion that he was not a payee or distributee within the meaning of section 408(d)(1) in 2008, the 

year for which respondent determined the deficiency at issue. 

On the basis of the foregoing, we hold that petitioner is not 

a distributee or payee within the meaning of section 408(d)(1) 

because the IRA distribution requests were unauthorized, the 

endorsements on the checks that were issued pursuant to the 

requests were forged, he did not receive the economic benefit 19 of the IRA distributions, and the IRA distributions 

were not made to discharge any legal obligation of his. 

Accordingly, we conclude that petitioner did not fail to report 

any income attributable to distributions from his 

SunAmerica and ING IRAs in 2008. 

III. Section 72(t) Additional Tax 

Section 72(t)(1) provides for a 10% additional tax on early 

distributions from qualified retirement plans, unless the distribution falls within a statutory exception. Because we hold 

that the withdrawals from petitioner’s IRA accounts at 

SunAmerica and ING were not distributions taxable to him 

under section 408(d)(1) in 2008, he is not liable for the section 72(t) additional tax. 

(569) ROBERTS v. COMMISSIONER 583

20For the first time on reply brief, respondent contends that petitioner 

alternatively is liable for a sec. 6662(a) penalty due to negligence. Generally, we will not consider an issue that is raised for the first time on 

brief. Estate of Aronson v. Commissioner, T.C. Memo. 2003–189 n.5 (citing 

Foil v. Commissioner, 92 T.C. 376, 418 (1989), aff ’d, 920 F.2d 1196 (5th 

Cir. 1990)). More importantly, by not raising the issue of negligence on 

opening brief, respondent has failed to provide petitioner with the opportunity to address this issue. Respondent’s attempt to first raise the issue 

of negligence as a basis for imposition of the sec. 6662(a) penalty on reply 

is untimely and prejudicial to petitioner. See Kansky v. Commissioner, T.C. 

Memo. 2007–40. We therefore do not consider it. 

IV. Filing Status 

Although petitioner does not discuss his filing status on 

brief and therefore could be deemed to have waived or abandoned that issue, see Muhich v. Commissioner, 238 F.3d 860, 

864 n.10 (7th Cir. 2001), aff ’g T.C. Memo. 1999–192, we 

briefly explain why we sustain respondent’s determination of 

petitioner’s filing status. The determination of whether an 

individual is married for purposes of determining filing 

status is made as of the close of the taxable year. Sec. 

7703(a)(1). Under certain circumstances, a married taxpayer 

may be treated as unmarried if he or she lives apart from his 

or her spouse during the last six months of the taxable year. 

See sec. 7703(b). 

The parties agree that petitioner and Ms. Smith were still 

married on December 31, 2008, and that they were not separated for the last six months of the year. Accordingly, the 

single filing status that Ms. Smith used in preparing petitioner’s separately filed 2008 return was erroneous. We find 

that petitioner’s correct filing status for 2008 under these circumstances was married filing separately. 

V. Accuracy-Related Penalty 

Respondent contends that petitioner is liable for the section 6662(a) penalty because petitioner’s underpayment was 

attributable to a substantial understatement of income tax. 20

Section 6662(a) and (b)(1) and (2) authorizes the imposition 

of a 20% penalty on the portion of an underpayment that is 

attributable, among other things, to a substantial understatement of income tax or to negligence or disregard of rules 

or regulations. A substantial understatement of income tax 

exists if the amount of the understatement exceeds the 

584 141 UNITED STATES TAX COURT REPORTS (569) 

greater of 10% of the tax required to be shown on the return 

or $5,000. Sec. 6662(d)(1)(A). The term ‘‘understatement’’ 

means the excess of the amount required to be shown on the 

return for the taxable year over the amount of tax imposed 

that is shown on the return, reduced by any rebate. Sec. 

6662(d)(2)(A). The amount of the understatement is reduced 

by that portion of the understatement that is attributable to 

(1) the tax treatment of any item if there is or was substantial authority for such treatment or (2) any item if the relevant facts affecting the item’s tax treatment are adequately 

disclosed in the return or in a statement attached to the 

return and there is a reasonable basis for the taxpayer’s 

treatment of the item. Sec. 6662(d)(2)(B). 

The Commissioner bears the initial burden of production 

with respect to the taxpayer’s liability for the section 6662 

penalty. Sec. 7491(c). At trial the Commissioner must introduce sufficient evidence ‘‘indicating that it is appropriate to 

impose the relevant penalty.’’ Higbee v. Commissioner, 116 

T.C. at 446. Once the Commissioner meets his burden of 

production, the taxpayer must come forward with persuasive 

evidence that the Commissioner’s determination is incorrect 

or that the taxpayer had reasonable cause or substantial 

authority for the position. Id. at 446–447. 

A taxpayer may avoid liability for the section 6662 penalty 

if the taxpayer demonstrates that the taxpayer had reasonable cause for the underpayment and that the taxpayer acted 

in good faith with respect to the underpayment. Sec. 

6664(c)(1). Reasonable cause and good faith are determined 

on a case-by-case basis, taking into account all pertinent 

facts and circumstances. Sec. 1.6664–4(b)(1), Income Tax 

Regs. The most important factor is the extent of the taxpayer’s efforts to assess his or her proper tax liability. Id. 

We have found that petitioner is not liable for income tax 

in 2008 related to the payments from his SunAmerica IRA 

and his ING IRA. However, petitioner conceded that he 

failed to report certain interest income and that he underreported wage income for 2008. Additionally, we have found 

that petitioner’s proper filing status for 2008 is married filing 

separately. Although petitioner did not see his tax return 

before Ms. Smith filed it on his behalf and he did not sign 

it, he did not disavow the return, nor did he file a different 

return for 2008. Petitioner did not introduce any evidence to 

(569) ROBERTS v. COMMISSIONER 585

prove that he took affirmative steps to ensure the correctness 

of his tax liability; and he cannot rely on Ms. Smith, who is 

not a professional tax return preparer. See sec. 1.6664–4(c), 

Income Tax Regs. Petitioner has not produced evidence that 

he acted with reasonable cause and in good faith with 

respect to these underpayments. Accordingly, to the extent 

that the Rule 155 computations show that the understatement of tax exceeds the greater of 10% of the tax required 

to be shown on the return or $5,000, see sec. 6662(d)(1)(A), 

petitioner is liable for the section 6662(a) penalty for an 

underpayment of tax attributable to a substantial understatement of income tax. 

We have considered the parties’ remaining arguments, and 

to the extent not discussed above, conclude those arguments 

are irrelevant, moot, or without merit. 

To reflect the foregoing, 

Decision will be entered under Rule 155

f 

.