1 Unless otherwise indicated, section references are to the

Internal Revenue Code in effect for the year in issue, and Rule

references are to the Tax Court Rules of Practice and Procedure.

T.C. Summary Opinion 2004-29

UNITED STATES TAX COURT

HOWARD T. OWENS, JR., AND ANN E. OWENS, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 1761-02S. Filed March 15, 2004.

Howard T. Owens, Jr., and Ann E. Owens, pro sese.

Frank W. Louis, for respondent.

WHERRY, 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.1 The decision to be entered

is not reviewable by any other court, and this opinion should not

be cited as authority.
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Respondent determined a Federal income tax deficiency for

petitioners’ 1999 taxable year in the amount of $2,000. The sole

issue for decision is whether petitioners are liable for the 10-

percent additional tax under section 72(t) for a withdrawal of

$20,000 on or about May 20, 1999, from an individual retirement

account (IRA) in the name of Ann E. Owens.

Background

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

The stipulations of the parties, with accompanying exhibits, are

incorporated herein by this reference. At the time the petition

was filed in this case, petitioners resided in Bridgeport,

Connecticut.

Petitioners Howard T. Owens, Jr., and Ann E. Owens, husband

and wife, were born on July 20, 1934, and March 29, 1941,

respectively. In 1999, petitioners owned multiple IRA accounts,

including a Fidelity Investments Traditional IRA in the name of

Howard T. Owens, Jr., and a Fidelity Investments Traditional IRA

in the name of Ann E. Owens. As of early May 1999, the balance

of the Howard T. Owens, Jr., account was in excess of $195,000

and that of the Ann E. Owens account was in excess of $85,000.

On or about May 20, 1999, a withdrawal in the amount of

$20,000 was made from the Ann E. Owens IRA. At this time, Ann E.

Owens was 58 years of age. The withdrawal was indicated on the
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quarterly investment reports sent to Ann E. Owens on or about

June 10, 1999, and September 9, 1999.

Petitioners filed a joint Form 1040, U.S. Individual Income

Tax Return, for 1999. On their return they included $20,049 as a

taxable pension distribution, based on the foregoing May 20th

withdrawal, but they did not report the 10-percent additional tax

attributable to a premature IRA withdrawal. On August 22, 2001,

respondent issued to petitioners a notice of deficiency

determining that they were liable for this additional tax in the

amount of $2,000.

Discussion

I. General Rules

In general, section 408 governs the treatment of IRAs. 

Specifically, section 408(d) provides that distributions from an

IRA are taxable in the manner directed in section 72 unless

properly rolled over within 60 days into another IRA or eligible

retirement plan. Section 72 typically operates to include

distributions in gross income, and subsection (t) provides for an

additional tax on premature distributions, reading as follows in

relevant part:

SEC. 72(t). 10-Percent Additional Tax on Early

Distributions from Qualified Retirement Plans.--

(1) Imposition of additional tax.--If any

taxpayer receives any amount from a qualified

retirement plan (as defined in section 4974(c)),

the taxpayer’s tax under this chapter for the

taxable year in which such amount is received
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shall be increased by an amount equal to 10

percent of the portion of such amount which is

includible in gross income.

(2) Subsection not to apply to certain

distributions.--Except as provided in paragraphs

(3) and (4), paragraph (1) shall not apply to any

of the following distributions:

(A) In general.--Distributions which

are--

(i) made on or after the date on

which the employee attains age 591⁄2,

(ii) made to a beneficiary (or to

the estate of the employee) on or after

the death of the employee,

(iii) attributable to the

employee’s being disabled within the

meaning of subsection (m)(7),

(iv) part of a series of

substantially equal periodic payments

(not less frequently than annually) made

for the life (or life expectancy) of the

employee or the joint lives (or joint

life expectancies) of such employee and

his designated beneficiary,

(v) made to an employee after

separation from service after attainment

of age 55, or

(vi) dividends paid with respect to

stock of a corporation which are

described in section 404(k).

(B) Medical expenses.-- * * * 

(C) Payments to alternate payees

pursuant to qualified domestic relations

orders.-- * * *

(D) Distributions to unemployed

individuals for health insurance premiums.--

* * *
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(E) Distributions from individual

retirement plans for higher education

expenses.-- * * *

(F) Distributions from certain plans for

first home purchases.-- * * *

(3) Limitations.--

(A) Certain exceptions not to apply to

individual retirement plans.--Subparagraphs

(A)(v) and (C) of paragraph (2) shall not

apply to distributions from an individual

retirement plan.

For purposes of the foregoing statute, section 4974(c) includes

an IRA described in section 408(a) as a qualified retirement

plan.

II. Contentions of the Parties

It is respondent’s position that petitioners’ IRA

distribution falls within the terms specified in section 72(t)(1)

for imposition of the 10-percent additional tax and that none of

the exceptions enumerated in paragraph (2) apply on these facts. 

Petitioners concede that the $20,000 was withdrawn from the IRA

of Ann E. Owens at a time she was only 58 years old and that the

amount was not rolled over into another retirement account or

plan. Additionally, petitioners have at no time contended that

any of the exceptions set forth in section 72(t)(2) are

applicable in their circumstances. Nonetheless, petitioners

apparently believe that they should be relieved of the 10-percent

additional tax on grounds of equity or fairness.
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2 The Court notes that its resolution of this matter turns

principally on the legal question of whether it may depart from

(continued...)

Howard T. Owens, Jr., provided the following testimony at

trial:

my recollection was that I asked Fidelity to take the

money out of my own account. And quite frankly, I

gave--I was not aware until maybe a year and a half

later after I filed my returns for the year 1999. That

would be in 199--I did probably file them in August

because I had an extension. And I got a report back

from the IRS that I had failed to give them the 10

percent, or my wife had failed to give them the 10

percent, and we had filed joint accounts.

My recollection is that I had given the materials

to my accountant, and he just assumed probably when I

showed it to him that my wife was of age and would not

be penalized at that time. We had no discussion on it

or anything of that sort.

Obviously, I got a report indicating that it had

been taken out of my wife’s account, one--the report

that you have there. But I just didn’t look at it for

some reason.

And it seems to me that the logic of it would

appear, since neither of these accounts had been very

active and have not been active since, nor has the

joint account been active since, that there would be no

reason for me to take any money from her account and

pay a penalty for it when I have in excess or close to

$200,000 in my own account. Now I realize that

obviously I was wrong. And as I said before, it was

too late to roll it over because I wasn’t made aware of

it until some time, maybe a year later or so, when I

got a notice from the IRS.

So that I’m just asking the Court--it seems to me

that since there was substantial money and it was my

intention and it is my recollection that I did direct

them to take it from the account, I think they took it

from the wrong account. And I don’t think I should be

penalized for it. That’s the sum and substance.[2]
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2(...continued)

sec. 72(t)(2), as written. Because the Court’s ruling on this

issue renders superfluous further facts beyond those stipulated

by the parties, no findings are made with respect to the accuracy

of additional aspects of Howard T. Owens, Jr.’s recollections. 

In a similar vein, this case is decided without regard to burden

of proof. See sec. 7491; Rule 142.

III. Analysis

The Court concurs with petitioners’ contentions that there

was little reason to withdraw funds from the IRA of Ann E. Owens

and incur an unnecessary 10-percent tax under section 72(t) when

the funds could have been withdrawn from Howard T. Owens, Jr.’s

IRA without imposition of the additional tax. Nevertheless, the

Tax Court is a court of limited jurisdiction and lacks general

equitable powers. Commissioner v. McCoy, 484 U.S. 3,7 (1987);

Hays Corp. v. Commissioner, 40 T.C. 436, 442-443 (1963), affd.

331 F.2d 422 (7th Cir. 1964). Consequently, our jurisdiction to

grant equitable relief is limited. Woods v. Commissioner, 92

T.C. 776, 784-787 (1989); Estate of Rosenberg v. Commissioner, 73

T.C. 1014, 1017-1018 (1980). This Court has no authority to

disregard the express provisions of statutes adopted by Congress,

even where the result in a particular case, such as the instant

proceeding, seems harsh. Estate of Cowser v. Commissioner, 736

F.2d 1168, 1171, 1174 (7th Cir. 1984), affg. 80 T.C. 783 (1983).

With respect to section 72(t) in particular, this Court has

repeatedly ruled that it is bound by the list of statutory

exceptions enumerated in section 72(t)(2). See, e.g., Arnold v.
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Commissioner, 111 T.C. 250, 255 (1998); Schoof v. Commissioner,

110 T.C. 1, 11 (1998); Clark v. Commissioner, 101 T.C. 215, 224-

225 (1993); Swihart v. Commisioner, T.C. Memo. 1998-407; Pulliam

v. Commissioner, T.C. Memo. 1996-354; Roundy v. Commissioner,

T.C. Memo. 1995-298, affd. 122 F.3d 835 (9th Cir. 1997). The

explicit and detailed inclusion of specific exceptions as part of

the statutory scheme itself suggests that other liberties should

not be indiscriminately inserted through the judicial process. 

Cf. Larotonda v. Commissioner, 89 T.C. 287 (1987) (interpreting

former section 72(m)(5), a penalty provision without the list now

contained in section 72(t)(2), and largely limited to its facts

by our subsequent holding in Aronson v. Commissioner, 98 T.C. 283

(1992)).

This impression is further buttressed by legislative

history. The 10-percent additional tax provision designated

section 72(t) was enacted as part of the Tax Reform Act of 1986,

Pub. L. 99-514, sec. 1123, 100 Stat. 2472. Committee reports

accompanying the statute’s passage reflect that the exceptions

given were a deliberate and considered part of the development of

section 72(t). See H. Rept. 99-426, at 727-731 (1985), 1986-3

C.B. (Vol. 2) 1, 727-731; S. Rept. 99-313, at 611-617 (1986),

1986-3 C.B. (Vol. 3) 1, 611-617; H. Conf. Rept. 99-841, at II-452

to II-458 (1986), 1986-3 C.B. (Vol. 4) 1, 452-458. Also, any

over-broadening of the grounds for exception could thwart the
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purpose identified in the legislative history for the additional

tax, to wit:

Although the committee recognizes the importance

of encouraging taxpayers to save for retirement, the

committee also believes that tax incentives for

retirement savings are inappropriate unless the savings

generally are not diverted to nonretirement uses. One

way to prevent such diversion is to impose an

additional income tax on early withdrawals from taxfavored retirement savings arrangements in order to

discourage withdrawals and to recapture a measure of

the tax benefits that have been provided. * * * [S.

Rept. 99-313, supra at 613, 1986-3 C.B. (Vol. 3) at

613; see also H. Rept. 99-426, supra at 727-728, 1986-3

C.B. (Vol. 2) at 728-729.]

In the face of these authorities, petitioners on brief cite

two potential bases in support of their request for relief from

the 10-percent tax. First, petitioners point to language in H.

Conf. Rept. 107-84, at 252-253 (2001), accompanying the Economic

Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107-16,

sec. 644, 115 Stat. 123. This legislation amended sections

402(c)(3) and 408(d)(3) to grant the Secretary authority to waive

the 60-day requirement for rollovers where failure to do so would

be against equity or good conscience. The conference report

cited by petitioners lists various circumstances that Congress

anticipated might qualify for such a waiver, including errors

committed by a financial institution. H. Conf. Rept. 107-84,

supra at 252-253.

However, neither the foregoing legislative changes nor their

underlying history aids petitioners here. Critically, the
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statutory amendments are effective only with respect to

distributions made after December 31, 2001. Economic Growth and

Tax Relief Reconciliation Act of 2001, sec. 644(c), 115 Stat.

123. Moreover, even if applicable, the provisions do not speak

to this Court’s authority to waive the additional tax on

premature withdrawals. No similar amendments were made to the

list of exceptions in section 72(t)(2).

Second, petitioners direct our attention to Doing v.

Commissioner, 58 T.C. 115 (1972). In that case, the taxpayer

sought in 1966 to transfer his assets from one retirement plan to

another. Id. at 119-120. He requested in writing that the

custodian of the first plan liquidate his investments and forward

the proceeds directly to the custodian for the new plan. Id. at

120. Thereafter, the custodian of the first plan, ignoring the

taxpayer’s instructions, sent the resultant check to the

taxpayer, who promptly endorsed the instrument and had it

forwarded to the new custodian. Id. at 121-122. The Court held

that the taxpayer was not liable for the penalty on premature

distributions under former section 72(m)(5). Id. at 129-131.

Doing v. Commissioner, supra, is alas distinguishable from

petitioners’ situation. As alluded to previously, cases decided

under former section 72(m)(5), which did not contain a detailed

list of exceptions comparable to present section 72(t), provide

little authority for departure from the current legislative
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scheme. Additionally, even if the two statutes could be

interpreted to afford similar latitude for equitable relief, the

equities in petitioners’ scenario bear insufficient resemblance

to those portrayed in Doing v. Commissioner, supra. The evidence

in that case clearly vindicated the taxpayer, showing both

faultlessness and vigilance by means of his specific written

instructions to the financial institution and his immediate

attempts to correct the subsequent error.

Petitioners, in contrast, offered testimony of only a

“recollection” of a request that Fidelity withdraw the $20,000

amount from the account of Howard T. Owens, Jr., coupled with an

admission of failure or inadvertence “for some reason” to look at

the account statement reflecting the distribution. They also

never made any prompt and concrete attempt to take remedial

action.

In conclusion, although the Court is sympathetic to

petitioners’ predicament, the circumstances of this case afford

no basis upon which petitioners may be relieved of the 10-percent

additional tax imposed under section 72(t). The Court holds that

petitioners are liable for the additional tax in the amount of

$2,000.

To reflect the foregoing,

Decision will be entered

for respondent.