1 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. Memo. 1996-365

UNITED STATES TAX COURT

TIMOTHY W. AND SUZANNE M. COFFIELD, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 1205-95. Filed August 8, 1996.

Timothy W. and Suzanne M Coffield, pro se.

Mark S. Mesler, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

DAWSON, Judge: This case was assigned to Special Trial

Judge Carleton D. Powell pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees with
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and adopts the opinion of the Special Trial Judge that is set

forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

POWELL, Special Trial Judge: Respondent determined a

deficiency in petitioners' Federal income tax and an accuracyrelated penalty pursuant to section 6662(a) for the taxable year

1991 in the respective amounts of $9,772 and $1,954. 

The issues are: (1) Whether a distribution from a qualified

retirement plan is includable in petitioners' gross income; (2)

whether petitioners are liable for an additional tax on the

distribution pursuant to section 72(t); (3) whether petitioners

are liable for an accuracy-related penalty pursuant to section

6662(a) for negligence; and (4) whether this Court has the

jurisdiction to redetermine respondent's interest computation in

this case. 

FINDINGS OF FACT 

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

The stipulation of facts and attached exhibits are incorporated

herein by this reference.

Petitioners resided in Evans, Georgia, at the time they

filed their petition in this case. The term "petitioner" refers

to Timothy W. Coffield.

Petitioner was born in Pittsburgh, Pennsylvania, in 1955. 

He lived in Pittsburgh and worked for Westinghouse Electric Co.
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(WEC) until 1991. In July 1991, petitioner ceased employment at

WEC, moved to Georgia, and began working for Westinghouse

Savannah River Co. (WSR). 

Petitioners purchased a home in Evans, Georgia, on September

30, 1991, for $219,900. They sold their home in Pittsburgh on

October 15, 1991, for $112,000. To finance a portion of the

purchase price of the new home, petitioner withdrew a total of

$51,002 from his WEC savings program, a qualified retirement

plan, by two requests dated July 12, 1991. The withdrawals

constituted only a portion of the savings plan. As of June 30,

1991, petitioner's Statement of Accounts from the savings plan

shows that he had a total of $24,153.63 in "after-tax

contributions". We assume that between June 30th and the date of

distribution, petitioner made some additional after-tax

contributions. At the time of the withdrawal petitioner had

contributed approximately $25,000 to the savings plan all of

which was withdrawn. A statement for December 31, 1991, shows no

after-tax contributions remaining in petitioner's account. WEC

issued a Form 1099-R for 1991 reporting $25,709 of the gross

distribution as taxable income to petitioner. Petitioners

apparently did not receive the Form 1099-R until after they filed

their Federal income tax return for 1991.

Petitioners did not report any income as a result of the

distribution on their 1991 joint Federal income tax return. In
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2 The parties agree that the savings plan constitutes a

"qualified plan". We presume this means a "qualified trust"

within the meaning of sec. 401(a), which is exempt from tax under

sec. 501(a), because neither party has argued to the contrary. 

the notice of deficiency respondent determined that petitioners

were liable for income tax on the portion of the distribution

reported as taxable income on the Form 1099-R ($25,709). 

Respondent further determined that the 10-percent additional tax

imposed by section 72(t) applied to this amount, and that

petitioners were liable for a negligence penalty pursuant to

section 6662(a).

OPINION

Savings Plan Distribution

Under section 402(a) any distribution from any employees'

trust described in section 401(a) that is exempt from tax under

section 501(a) shall be taxable to the distributee in the year of

distribution under section 72.2 Section 72(e) provides that the

amount received is includable in gross income, except to the

extent attributable to an individual's investment in the

contract. For our purposes here, petitioner's investment in the

contract is the amount of his "after-tax contributions".

Section 402(a)(5) excludes from gross income any portion of

a distribution from a qualified trust that is transferred to an

eligible retirement plan. The term "eligible retirement plan" is

defined as (1) an individual retirement account described in
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section 408(a); (2) an individual retirement annuity described in

section 408(b) (other than an endowment contract); (3) a

qualified trust; and (4) an annuity plan described in section

403(a). Sec. 402(a)(5)(E)(iv).

Petitioner's investment of the distribution into a personal

residence does not constitute a transfer to an "eligible

retirement plan" within the meaning of section 402(a)(5)(A)(ii).

See Harris V. Commissioner, T.C. Memo. 1994-22; Luke v.

Commissioner, T.C. Memo. 1993-409. It is a well-established

principle that "exemptions from taxation are not to be implied;

they must be unambiguously proved." United States v. Wells Fargo

Bank, 485 U.S. 351, 354 (1988). Section 402(a)(5) does not apply

to exclude the distribution from gross income, and we must apply

the general rule of section 402(a).

As discussed infra, it appears from petitioner's statements

from the savings plan that the Form 1099-R excluded the

proportionate share of petitioner's investment in the contract. 

Accordingly, we hold that the taxable portion of the distribution

was $25,709, and that amount was taxable to petitioners during

1991. We, therefore, sustain respondent's determination on this

issue.

Section 72(t) Additional Tax

Section 72(t)(1) imposes an additional tax on an amount

received from a qualified retirement plan equal to 10 percent of
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the portion of such amount that is includable in gross income. 

Section 72(t)(2) exempts distributions from the additional tax if

the distributions are made, inter alia, (1) to an employee age

59-1/2 or older; (2) to a beneficiary (or to the estate of the

employee) on or after the death of the employee; (3) on account

of disability; (4) as part of a series of substantially equal

periodic payments made for life; (5) to an employee after

separation from service after attainment of age 55; or (6) as

dividends paid with respect to corporate stock described in

section 404(k).

None of the specifically enumerated exceptions in section

72(t)(2) applies to the distribution, and we have held that a

portion of the distribution must be included in petitioner's

gross income. Accordingly, petitioners are liable for the

additional tax imposed by section 72(t)(1) on the portion of the

distribution includable in gross income as determined by

respondent.

Accuracy-related Negligence Penalty

In the notice of deficiency respondent determined that

petitioners are liable for an accuracy-related penalty for

negligence or disregard of the rules or regulations. Section

6662(a) and (b)(1) impose an accuracy-related penalty equal to 20

percent of the portion of the underpayment of income tax that is

attributable to negligence. Negligence includes the failure to
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make a reasonable attempt to comply with the law and disregard of

the rules and regulations includes any "careless, reckless, or

intentional disregard." Sec. 6662(c). While we have sustained

respondent's determinations with respect to the savings plan

distribution includable in gross income and the additional tax

under section 72(t), we do not believe that the understatement of

tax was due to negligence. It appears that petitioner was not

given a Form 1099R or any other notice that the withdrawal was

taxable prior to filing his return. As we understand, petitioner

thought that the withdrawal of his contribution and the earnings

thereon were exempt. While he was incorrect, we recognize that

there may be room for confusion.

Interest

Petitioner argues that we should abate the interest

determination made by respondent pursuant to section 6404(e)

because of respondent's delay in issuing the notice of

deficiency. The United States Tax Court is a court of limited

jurisdiction. See sec. 7442; Wilt v. Commissioner, 60 T.C. 977,

978 (1973). New section 6404(g), added to the Internal Revenue

Code by section 302 of the Taxpayer Bill of Rights 2, Pub. L.

104-168, authorizes this Court to review the Secretary's failure

to abate interest with respect to requests for abatement after

July 30, 1996. Because this case does not involve a request for

abatement after July 30, 1996, we lack jurisdiction to abate
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interest herein. See Commissioner v. McCoy, 484 U.S. 3, 7

(1987); 508 Clinton Street Corp. v. Commissioner, 89 T.C. 352,

354 (1987). 

Decision will be entered for

respondent with respect to the 

deficiency, including the 

additional tax under sec. 72(t), 

and decision will be entered for 

petitioners with respect to the 

penalty under sec. 6662(a).