1 Unless otherwise indicated, all 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.

T.C. Summary Opinion 2009-21

UNITED STATES TAX COURT

SUSAN ELIZABETH MACHLAY, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13291-07S. Filed February 10, 2009.

Susan Elizabeth Machlay, pro se.

Jon D. Feldhammer, for respondent.

PANUTHOS, Chief 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
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2 Petitioner described the diagnoses and treatment she

received for her medical problems, and she explained the selfdestructive choices she made which amplified her medical

problems. 

any other court, and this opinion shall not be treated as

precedent for any other case.

Respondent determined a deficiency of $8,555.70 in

petitioner’s 2005 Federal income tax.

The issue for decision is whether petitioner is liable for

the 10-percent additional tax imposed by section 72(t) on an

early distribution she received in 2005 from an employer-provided

pension plan.

Background

Some of the facts have been stipulated, and we incorporate

the stipulation and accompanying exhibits by this reference. 

Petitioner was born in 1958 and lived in California when she

filed the petition. 

Petitioner began working for a telephone company in 1980. 

In 1993 the company fired petitioner over an incident with a

customer. However, she was diagnosed with a medical problem and

began treatment. The telephone company reinstated her about 6

weeks later (with seniority but without backpay). Petitioner’s

medical condition continued and was later exacerbated by certain

choices petitioner made.2 As a result, petitioner was absent

from work many times.
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Petitioner quit her job in August 2005 because she was

afraid more absences would result in the company’s firing her and

in her losing her entire pension. Petitioner withdrew $85,557 in

a lump-sum distribution from the company’s pension plan in 2005

and reported the entire amount as income on her Federal tax

return. 

Petitioner worked intermittently between August 2005 and the

fall of 2006, when she realized her funds were running out. In

2006 petitioner enjoyed a substantial improvement in her medical

condition. She found a job at a small newspaper, and she was

working at the time of trial. The pay was far less than what she

had earned working for the telephone company.

Respondent determined a deficiency of $8,555.70, resulting

from the 10-percent additional tax imposed by section 72(t) on

petitioner’s distribution, and issued a notice of deficiency.

Petitioner filed a timely petition for redetermination. 

Petitioner asserts that she cannot afford to pay the additional

tax. As of the time of trial, petitioner was not receiving

either treatment or medication for the medical problems that

plagued her in 2005.

Discussion

In general, the Commissioner’s determinations set forth in a

notice of deficiency are presumed correct, and the taxpayer bears

the burden of proving that these determinations are in error. 
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3 In any event, we do not decide the issue in this case on

the burden of proof. Also, regardless of whether the additional

tax under sec. 72(t) would be considered an “additional amount”

under sec. 7491(c) and regardless of whether the burden of

production with respect to this additional tax would be on

respondent, respondent has met any such burden of production by

showing that petitioner received the distribution when she was 46

or 47 years of age. See H. Conf. Rept. 105-599, at 241 (1998),

1998-3 C.B. 747, 995.

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 her compliance with its requirements. Petitioner

therefore bears the burden of proof.3

Section 72(t) generally provides for a 10-percent additional

tax on an early distribution from a qualified retirement plan,

unless the distribution comes within one of the statutory

exceptions. Sec. 72(t)(1) and (2). At issue here is the

exception provided in section 72(t)(2)(A)(iii), pertaining to

distributions attributable to an employee’s being disabled within

the meaning of section 72(m)(7). 

Section 72(m)(7) defines the term “disabled” as follows:

an individual shall be considered to be disabled if he is

unable to engage in any substantial gainful activity by

reason of any medically determinable physical or mental

impairment which can be expected to result in death or to be

of long-continued and indefinite duration. An individual

shall not be considered to be disabled unless he furnishes

proof of the existence thereof in such form and manner as

the Secretary may require. 
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A disability must render a taxpayer unable to engage in the

same activity or an activity comparable to the one the taxpayer

engaged in before the disability arose. Sec. 1.72-17A(f)(1),

Income Tax Regs. The regulation lists a number of examples of

impairments that would ordinarily be considered to prevent a

taxpayer’s engaging in substantial gainful activity. Sec. 1.72-

17A(f)(2), Income Tax Regs. However, the regulation makes it

clear that the expected duration of the impairment must be

indefinite and that the impairment must be irremediable. If with

reasonable effort and safety an impairment can be so diminished

that it will not prevent the taxpayer from engaging in her

customary or comparable gainful activity, then the taxpayer is

not disabled within the meaning of section 72(m)(7) and she is

not eligible for the disability exception of section

72(t)(2)(A)(iii). Kovacevic v. Commissioner, T.C. Memo. 1992-

609; sec. 1.72-17A(f)(4), Income Tax Regs.

In 2006 petitioner discontinued the self-destructive life

choices which had previously increased the severity of her

medical condition. She explained at trial that although she

received treatment from doctors in 2005, she did not seek or

require constant care or supervision, then or later. At the time

of trial she was not being treated or taking medication for these

ailments.
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Petitioner worked intermittently while her pension funds

lasted and then struggled to find permanent employment. Although

she was unable to secure a job as remunerative as her position

with the telephone company, she was gainfully employed in a

position that provided her funds for food, shelter, and regular

visits to her family.

Absent persuasive evidence that petitioner’s ailments were

permanent and irremediable and precluded her from engaging in

substantial gainful activity, we conclude that petitioner does

not qualify for the exception provided by section

72(t)(2)(A)(iii). See Dwyer v. Commissioner, 106 T.C. 337, 341

(1996); Kowsh v. Commissioner, T.C. Memo. 2008-204.

We conclude on this record that petitioner is subject to the

additional 10-percent tax imposed by the statute on early

distributions. 

To reflect our disposition of the issues,

Decision will be entered

for respondent.